Try and read as much about the company as possible-Make sure to check out annual and quartelry reports for your company
Company Description
• Leading global security company • Formed in 1939 as Northrop Aircraft
Incorporated• Acquired Grunman Corporation in 1994• Conducts most of its business with U.S
Government (DoD)
Andrew Pohlman
Questions to Ask Yourself:-How does this company make money?-What products/Services do they sell?-What industry are they in?-What is their strategy within that industry?To learn more ablout your company look at:-Bloomberg12.) Research-Think or Swim-Go To Fundamentals-Larger companies will have as section called Company Details that provides a pretty solid overviewMorningstar--Go to the Friedsam Library tab on My.SBU.edu-Click on articles & Databases-Scroll down to the Business section and choose Morninstar-Click on the stock analysis tab on your comany page
Stock Performance
Ticker Market Value
52 Week High
52 Week Low
Beta Market Cap
P/E (TTM)
NOC 170.11 172.30 116.11 .63 33.77B 17.90
Windows User
Bloomberg:18.)Historical Line ChartRight Click on chartCopy image on to clipboardPaste in Powerpoint*Info and Graph can be taken from pretty much any investing website. Take a screen shot of the graph, crop it, and paste it into powerpointQuestions to ask yourself:-Why does the chart look the way it does?-What pieces of news explain major moves in the stock price? (Press release, Earnings Report, Industry News, etc.)-If the stock is near its high can you justify why you think it is going to keep going up?-If the stock is near its low why do you think it is going to rebound?-What does the Beta tell us about the risk of the stock?
Operating Segments% of Revenue 2013 % Of Revenue 2014
Aerospace Systems
37.6% 38.5%
Electronic Systems
26.9% 26.8%
Information Systems
24.8% 24.0%
Technical Services
10.7% 10.8%
Windows User
Bloomberg:6.) Financial Analysis6.) Segments-Click on small bar graph icon next to revenue to generate chart on next slide.-Right click on the chart and go to copy/export options-Choose copy image to clipboard-Paste in Power Point*This info can also be found in the companies 10-K report on SEC Edgar**You may also want to talk about geographic segments depending on the company
Capital Structure
• Total Debt: 45%• Total Equity: 55%• Debt used to finance operations: 15%
Operating Segment
Windows User
Talk about different trends With revenue.A few questions to ask:-Will Growth be able to continue at the same rate?-Why are some segments sales declining?-Why are some segments performing so well?-What do you expect these segments to look like next year? the year after that? 5 years from now?
Industry Analysis• U.S Government has established policy that will permit
widespread export of armed drones to foreign nations upon approval.
• Companies boosting stock performances by buying back shares.
• Slower GDP growth in rising economies such as India and China may result in order deferrals/ cancellations.
Andrew Pohlman
*You can ask yourself similar questions if your company requires you to look at geographic segmentsQuestions to ask yourself:-What is your comapanies position in the industry?-How does your company differentiate themselves from their peers-What are relavent industry trends?-What is your companies market share today?-What do you expect their market share to be in the future?-What Macro events have an impact on the industry?-Are new companies entering the industry?-What is driving industry growth?-What do you expect the industry to look like going forward?Bloomberg:3.) News13.) BI Primary IndustryThink or Swim:-Check out the fundamentals section under the Analyze tabMorningstar:-Access through the schools Friedsam Library on My.Sbu-Stock analysis
Peer AnalysisTicker Market
Cap ($)P/E Forward
P/EP/S P/B P/CF EV/
EBITDA
LMT 65.21B 18.11 18.52 1.42 19.08 17.00 10.62
BA 108.74B 20.84 18.12 1.20 12.59 12.54 11.18
RTN 33.86B 16.20 17.22 1.48 3.55 15.72 9.58
GD 47.00B 17.97 16.99 1.51 3.98 12.70 10.61
NOC 33.77B 17.88 18.05 1.41 4.68 13.30 9.79
Andrew Pohlman
Questions to ask yourself:-Are these the closest peers to your company?-How is each peer similar to your company?-How is each peer different from your company?-Is your company small or large compared to their peers?-What are each of these ratios really showing you?-What conclusions can you draw about your company and the industry based on this information?Bloomberg:6.)Fiancial Analysis9.) CustomType in to search fieldMonringstar.com:-ValuationYahoo Finance:-Key Statistics
Recent Company News• Contract from the U.S Navy• Declared dividend of $.70/share in line with
previous quarter, forward yield of 1.6%• NOC Earnings Report– Net income up from fourth quarter year prior.– Stock repurchase program.– Increased backlog from year prior.
Windows User
Questions to ask yourself:-Why is peice of news important to shareholders?-What immediate impact did this new information have on the stock price?-What impact will this news have on the company going forward?Bloomberg:4.) Company News
Analyst Opinions
Consensus Rating
3.40
Buys 30.0% (6)
Holds 60.0% (12)
Sells 10.0% (2)
12 M Target Price
167.50
Date Analyst Target Price
02/24/15 RBC $176
02/17/15 Sanford $184
02/12/15 Barclays $152
02/09/15 Buckingham Research
$156
02/06/15 Argus Research
$185
1/04/15 Goldman Sachs
$181
Windows User
Bloomberg:11.)Earnings & Estimates3.)Analyst Coverage*Add chart From DCF
Actual Revenue $6.157B $5.848B $6.093B $5.984B $6.108B
Analyst EPS Estimate
$1.94 $2.13 $2.20 $2.14 $2.20
Actual EPS $2.13 $2.63 $2.37 $2.26 $2.49
Windows User
Questions to ask yourself:-What is the reason the company missed/beat expectations.-How did the companies shareholders react to the earnings release-What important information was discussed in the comanies most recent earnings report/call.-What are analyts expecting future earnings to look like? Do you agree? Why or why not?-How have earnings changed over the past couple of yearsBloomberg:11.)Earnings & Estimates1.) Earnings History-CLick on Measure, Choose EPS Adjusted & SalesCheck out the companies most recent earnings release and earnings call. Managements discussion of earnings give important insights to the companies direction/future.
Technical Analysis
Windows User
Make sure to include MACDBloomberg:17.) Charting & Reporting2.)TechChoose MACDRight Click on chart & export to clipboardPaste in Powerpoint* You can also take screen shots from stockcharts.com or freestockcharts.com
Risks
• Decreased revenues.• Cyclical industry.• 2011 Budget Control Act comes into affect this
fiscal year which puts a ceiling of $499 billion spending cap.
• 85% of total sales comes from US Government.
Summary
• Overall we believe that NOC is a good investment at this time because:– Solid stock price performance.– Reasonable debt levels.– Good cash flow from operations.– Notable ROE.– Strong bottom line growth.– Good cash levels to cover short term obligations/
payoffs.
Recommendation
Technique Value WeightDCF 181.08 25%P/E 196.96 20%P/B 226.08 20%P/S 177.73 20%EV/EBITDA 150.72 5%Analyst Mean 164.78 5%Analyst Median 156.00 5%Target Price $189.00 100%
Market Price $170.19
Price Change 11.05%
Recommendation
TDA Shares 10
BoNY Shares 25
Total Shares 35
Market Price $170.19
Total Cost $5956.65
% of Portfolio 2.16%
Current Sector Weight
~5%
Windows User
Questions to ask yourself:-Is our target price far enough above the current price to make an investment worthwhile?-Is your recommended number of shares split 1/3 in TDA & 2/3 in BoNY?-Are we currently underweight/overweight in your sector? What impact would this have on our decision?-Do we have enough cash to make this trade?Take chart on right from DCF sheet in excel
