NEW YORK (TheStreet) -- Northrop Grumman launched into a higher orbit setting an all-time intraday high this morning. The company reports quarterly earnings before the opening bell on Wednesday. Analysts expect the aerospace and defense giant to report earnings per share at $2.20. The stock is up 42% over the last 12 months, has a 12 month trailing price to earnings ratio of 14.8 and a 2.2% dividend yield.
A little history lesson:
Last Sunday began the 45th anniversary of the Apollo 11 mission that put man on the moon. As a Grummanite I can remember that five hour-plus silence as spacecraft disappeared behind the moon in preparation for orbiting the moon.
Upon landing on the Sea of Tranquility, the world applauded the words, "The Eagle has landed". The Eagle was the name given to the Lunar Excursion Module (LEM) on the Apollo 11 mission. Astronaut Neil Armstrong made the first step on the moon and proclaimed, "One small step for man, one giant leap for mankind". The successful mission ended with a splash in the Pacific Ocean on July 24, 1969.
I joined Grumman in Bethpage, Long Island shortly after graduating from Georgia Tech in June 1966. As an engineer in the Manufacturing Standards Department I occasionally supported the manufacturing of the Lunar Module. It was a joy whenever I was invited into a "clean room".
Grumman Aircraft Engineering won the contract to build 13 Lunar Excursion Modules in November 1962. The Lunar Module was a part of the Apollo Program carried out by the National Aeronautics and Space Administration.
The program was first conceived during the Presidency of Dwight D. Eisenhower, but it was President John F. Kennedy's goal to land a man on the moon and return him safely to Earth by the end of the decade.
Between 1969 and 1972 six lunar modules landed on the moon and a total of 12 astronauts walked on the moon. The first moon walkers were Neil Armstrong and Buzz Aldrin with Michael Collins remaining in the command spaceship.
Grumman changed its name to Grumman Aerospace in 1969 and in 1994 was acquired by Northrop Corporation forming Northrop Grumman.
Let's look at the daily chart:
Courtesy of MetaStock Xenith
Northrop Grumman traded as high as $126.38 so far today, which is an all-time intraday high. The stock is above its 21-day, 50-day and 200-day simple moving averages at $121.58, $121.38 and $116.19. The 12x3x3 daily slow stochastic has become overbought.
Let's look at the weekly chart:
Courtesy of MetaStock Xenith
Northrop Grumman has a positive weekly chart with its five-week modified moving average at $122.75. Its 200-week simple moving average lags at $76.58. The 12x3x3 weekly slow stochastic is rising at 67.80 on a scale of 00.00 to 100.00 where a reading above 80.00 is overbought and a reading below 20.00 is oversold. The weekly chart pattern appears parabolic making an earnings beat and positive guidance important.
Investors interested in buying this stock should consider using a good 'til canceled limit order to buy weakness to a semiannual value level at $120.36 then adding to that position at a lower semiannual value level at $102.05.
Investors worried about the downside risk should consider using a GTC limit order to sell strength to a quarterly risky level at $129.56.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff
TheStreet Ratings team rates NORTHROP GRUMMAN CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate NORTHROP GRUMMAN CORP (NOC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Powered by its strong earnings growth of 29.55% and other important driving factors, this stock has surged by 39.90% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NOC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- NORTHROP GRUMMAN CORP has improved earnings per share by 29.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, NORTHROP GRUMMAN CORP increased its bottom line by earning $8.34 versus $7.80 in the prior year. This year, the market expects an improvement in earnings ($9.24 versus $8.34).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Aerospace & Defense industry average. The net income increased by 18.4% when compared to the same quarter one year prior, going from $489.00 million to $579.00 million.
- The current debt-to-equity ratio, 0.56, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.35, which illustrates the ability to avoid short-term cash problems.
- You can view the full analysis from the report here: NOC Ratings Report