Northrop Grumman Corporation’s (NOC) shares gained 5.6% on Friday on account of the share buybacks announced on Thursday and upgrade by analysts. Its shares rallied to an all-time high at $148.77, finally closing Friday’s trading session at a slightly lower price of $147.69.
The board of directors of Northrop has approved the repurchase of additional $3 billion of the company’s common stock. The company intends to buyback 25% of its shares by 2015-end. (Read More: Defense Companies Northrop and L-3 Boost Share Buybacks)
Analysts at Goldman Sachs upgraded Northrop to “conviction buy” from “buy”, pushing the target price to $165 from the previous $163. They consider the stock a lucrative one mainly on its role as a subcontractor of the F-35 Joint Strike Fighter (“JSF”) program, one of the largest growth programs of the Pentagon. F-35 JSF is the priciest weapons system in U.S. history with Lockheed Martin Corp. (LMT) being the prime contractor.
News of share buybacks and analyst upgrades have boosted investor confidence in the company’s future prospects substantially. On Friday, the company’s stock had a trading volume of approximately 2.1 million shares compared to its average trading volume of about 1.2 million shares per day.
This Zacks Rank #3 (Hold) company boasts of a strong balance sheet position, which has enabled it to repurchase shares. Northrop’s cash & cash equivalents as of Sep 30, 2014 were $3.4 billion. The company’s net cash from operating activities during the first nine months of 2014 was $41.1 billion. Free cash flow during the third quarter was $824 million. Northrop also reported a repurchase of 6 million shares for $753 million during the third quarter, bringing its year-to-date repurchase to 37.7 million shares as of Sep 30, 2014.
Northrop is thus committed to deliver value to its shareholders and focus on effective deployment of its cash.
Industry Peers
Apart from Northrop, other defense companies have also announced share repurchase programs with the sequestration cutting down revenues. Recently, L-3 Communications Holdings Inc. (LLL) declared that its board of directors has approved the repurchase of additional $1.5 billion of its common stock through second-quarter 2017. The Boeing Co. (BA) also expects to complete the repurchase authorization of $5.8 billion over the next two years.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment