RBC's Stallard Slowing Down On Military Defense Sector, Downgrades Northrop To Sector Perform

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Northrop Grumman Corporation NOC has been downgraded from Outperform to Sector Perform by RBC Capital Markets' Robert Stallard. The analyst did not change the $222 price target.

The downgrade from Stallard comes as he "takes a breather" from a ten-year valuation peak. The valuation peak is due to the B-21 franchise program, which will be a major part of Northrop for "decades to come," Stallard noted. The LRS-B win could also be attributed to the increase in valuation, but details remain slim to none on the topic. Suspicion remains that the B-21 program may be dilutive of margins.

Related Link: Despite Lockheed's Decade-High Valuation, RBC Downgrades On Expected Slowdown

The rest of Northrop's portfolio is "well placed in the DoD's budget and defense export trends," Stallard said. The E-2D and UAV programs will be positive contributors along with the overall portfolio that should support consistent cash generation.

Stallard remains positive on Northrop, but before "fresh capital can be deployed into the stock," he is in need of a better entry point.

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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsTrading IdeasRBCRBC Capital MarketsRobert Stallard
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