Northrop Grumman ( NYSE: NOC ) on Friday was downgraded to Market Perform from an investment rating of Outperform by analysts at Cowen. They said the aerospace and defense company’s warning about losing money on developing the B-21 Raider stealth bomber is reason for caution.
When Northrop ( NOC ) reported quarterly results, it said there’s a possibility of a $1.2 billion loss during the first five years of what’s known as low-rate initial production (LRIP) of the nuclear bomber, which the company and the U.S. Air Force publicly unveiled last month.
“At this point we don’t believe that a loss is probable,” David Keffer, CFO of Northrop ( NOC ), said during the company’s regularly scheduled call with analysts and investors. “We do believe that a loss is possible.”
The disclosure of a “reasonably possible” loss in a regulatory filing on the B-21 work “looks like an extended overhang to what’s been the sector’s cleanest growth story,” according to Cowen. “Northrop Grumman’s ( NOC ) fundamentals are otherwise healthy, and we see continuing strong support for defense spending.”
Cowen lowered its price target for Northrop ( NOC ) to $478 from $500 a share, based on an enterprise value-to-EBITDA multiple of 15 times 2023 estimated results.
Northrop ( NOC ) declined 4.2% on Thursday after reporting earnings that beat Wall Street's estimates.
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Northrop Grumman downgraded to Market Perform at Cowen on B-21 costs