Analyst Noah Poponak, who has a price target of $337 a share on the stock, told investors in a research note that "despite key long-term platform wins, Northrop Grumman has undergrown defense peers the last few years and appears it will again in 2020 and 2021."."
Last week, the Falls Church, Va., company reported third-quarter earnings of $933 million, or $5.49 a share, compared with $1.2 billion, or $7.11, in the year-earlier period. Analysts polled by FactSet had been expecting earnings of $4.77 a share.
Sales rose 5% to $8.5 billion "due to higher sales in all three business areas," particularly manned aircraft, the company said.
Poponak said growth in the top line at NOC should speed up at some point, "as the wall of new program contributions comes through."
But "it is looking increasingly less likely that happens in 2020 or even 2021," considering that "the Bomber and [Ground-Based Strategic Deterrent weapons system] ramp up in earnest closer to the middle of the decade, while the F-35, the unmanned business, and legacy Orbital ATK are all starting to level out following several years of strong growth."
Northrop Grumman closed the purchase of aerospace- and defense-technology provider Orbital ATK in June 2018.
Poponak added that he still sees Northrop Grumman "as well positioned in the very long term," and investors might consider buying it again in the future.
"But right now there are too many growth inputs showing outgrowth is unlikely for a few more years, and the stock is expensive," he said.
"We would recommend selling a position now and reevaluating down the line."
At last check Northrop Grumman shares were down 1.7% at $368.29.
The shares have risen 42% since they touched a 52-week low above $263 last March. They were 8.9% higher in 2020 through Friday's close.