Why Northrop Grumman Stock Is Plummeting Today

Source The Motley Fool

The stock of Northrop Grumman (NYSE: NOC) is getting hit with big sell-offs Tuesday following the company's recently published first-quarter results. The share price was down 11.4% as of noon ET today amid the backdrop of a 1.9% gain for the S&P 500.

Northrop posted its first-quarter Q1 results before the market opened this morning, and both sales and earnings fell short of Wall Street's expectations. In addition to weaker-than-anticipated performance last quarter, the company also lowered its full-year performance targets.

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Northrop Grumman stock sinks on big misses

The company posted earnings per share (EPS) of $6.06 on sales of $9.47 billion in the quarter. Unfortunately, the average analyst estimate had called for the business to report per-share earnings of $6.26 on sales of $9.94 billion. Revenue fell 7% year over year due to softer performance for its space systems and aeronautics systems.

While defense systems sales increased 4% with its Sentinel intercontinental ballistic missile and other military munitions, the aeronautics segment saw an 8% year-over-year sales decrease due to lower demand for the B-21 bomber and other catalysts. Space segment sales fell 18% compared to last year's quarter due to softer demand on classified projects and next-generation missile initiatives.

What's next for Northrop?

With its first-quarter report, management reiterated its guidance for full-year sales between $42 billion and $42.5 billion and free cash flow between $2.85 billion and $3.25 billion. The forecast was unchanged on those fronts, but management lowered its full-year earnings guidance. It now expects EPS to be between $24.95 and $25.35 -- down from its previous guidance between $27.85 and $28.25.

In addition to the performance shortfall and substantially lower earnings outlook, segment details in today's earnings report are causing some investors to reassess the narrative and outlook surrounding Northrop Grumman. The company had recently generated excitement as a space industry play, but weak performance for the space segment last quarter could dampen that enthusiasm until there are signs of a positive new catalyst on the horizon.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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