Tuesday, Truist Securities began coverage on Northrop Grumman shares (NYSE: NOC), issuing a Buy rating and setting a price target of $544.00. Currently trading at $472.38, the defense contractor's stock is seen as an attractive investment following an 18% decline from its peak of $555.57 in late 2024.
According to InvestingPro data, the stock has shown relatively low price volatility, with a beta of just 0.34. Truist Securities believes that concerns about defense spending related to DOGE are exaggerated and anticipates that U.S. and NATO defense expenditures will continue to increase.
The analyst from Truist Securities highlighted that Northrop Grumman's key defense programs, such as the B-21 Raider and the Sentinel Ground Based Strategic Deterrent (GBSD), are expected to provide a stable base for growth. These programs are part of the nuclear triad modernization efforts and are likely to benefit from ongoing demand for missiles and munitions.
Truist Securities' initiation of coverage comes at a time when Northrop Grumman's stock had retreated from its highs, presenting what the firm sees as a significant opportunity for investors. The company's strong market position is reflected in its impressive dividend history, having maintained payments for 54 consecutive years with 21 years of consecutive increases. The firm's outlook is based on the belief that global security threats remain high, which in turn supports sustained defense funding.
The analyst also addressed potential competition, stating that new market entrants are not expected to pose a significant threat to Northrop Grumman's established portfolio. This confidence in the company's market position contributes to the positive outlook and the Buy rating assigned to the stock.
With the price target of $544.00, Truist Securities signals its belief in the value proposition offered by Northrop Grumman shares at their current levels. The firm's coverage initiation and price target suggest a favorable view of the company's prospects in the defense sector. Based on InvestingPro's comprehensive analysis, which includes over 30 key metrics and financial indicators, Northrop Grumman currently trades near its Fair Value. Discover more detailed insights and analysis in the Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Northrop Grumman Corporation (NYSE:NOC) has reported solid earnings and revenue results, with annual revenue reaching $40.98 billion. Recent developments include the initiation of the Modified Ballistic Re-Entry Vehicle-11 (MBRV-11) production, a key component for missile defense testing.
The company has also successfully assembled and tested the PTS-P satellite payload in collaboration with the U.S. Space Force’s Space Systems Command, marking a significant step towards enhancing satellite communication technologies for national defense.
Moreover, Northrop Grumman has conducted a series of tests for a new solid rocket motor, enhancing the U.S. Navy's extended-range capabilities, and expanded its stock buyback program by $3 billion. The company has achieved Initial Operational Capability for the first battery of Poland's WISŁA medium-range air defense program, featuring Northrop Grumman's Integrated Battle Command System.
Furthermore, Northrop Grumman has been selected to supply the U.S. Navy with a new E-130J aircraft. The company's fourth quarter and full-year 2024 financial results are set to be released on January 30, 2025, with analysts forecasting EPS of $26.29 for FY2024. Analyst firms such as Jefferies, Susquehanna, and UBS have revised their outlooks on Northrop Grumman's shares positively, following these recent developments.
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