When considering what names to put on a watchlist, look for stocks with an 80 or higher Relative Strength Rating. Aerospace/defense giant Northrop Grumman just flew past that benchmark with an 11 point surge from 70 to 81.
The upgraded 81 RS Rating shows that Northrop Grumman is in the top 19% of all stocks in IBD's database. It's a notable jump because market history shows that the best stocks tend to have an RS Rating north of 80 in the early stages of their moves.
One reason for the ratings jump is in January the company reported an amazing reversal in earnings from a $1.45 per share loss in the December 2023-ended quarter to $6.39 EPS in the December 2024 quarter, topping Wall Street estimates. The three quarters prior to last quarter, Northrop Grumman reported EPS gains of 9%, 14% and 7%.
Last quarter watchlist candidate Northrop reported that revenue was flat with the same quarter a year earlier at $10.7 billion. Look for that to improve this year amid expected higher defense spending by European countries.
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Northrop Grumman Stock Popped This Month
Another reason for the RS rating upgrade is a recent surge in its stock price.
NOC stock rose from a 426.24 low on Feb. 20 to trade at 489.37 Tuesday afternoon, a nearly 15% rise in less than three weeks. Northrop Grumman stock is working on a consolidation pattern with a 555.57 buy point. See if it can clear the breakout price in volume at least 40% above average.
Among its other ratings the Falls Church, Va.-based company has a robust 90 Composite Rating. The Composite score combines five separate proprietary ratings into one. The best growth stocks have a Composite Rating of 90 or better.
It has a mild 73 EPS Rating. But its B Accumulation/Distribution Rating on an A+ to E scale shows fairly heavy buying by funds.
Northrop Grumman holds the No. 18 rank among its peers in the Aerospace/Defense industry group. Embraer and Heico are among the top five highly rated stocks within the group. The group itself ranks a solid No. 22 on IBD's list of 197 industry groups.
IBD's proprietary Relative Strength Rating identifies share price performance with a 1 (worst) to 99 (best) score. The score shows how a stock's price behavior over the last 52 weeks compares to all the other stocks in our database.
This article was created automatically with Stats Perform's Wordsmith software using data and article templates supplied by Investor's Business Daily. An IBD journalist may have edited the article.
Please follow James DeTar on Twitter @JimDeTar
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