NOC stock is the IBD Stock Of The Day as it tops an early entry from a 50-day bounce. The U.S. announced new military funding for Ukraine at Thursday's NATO summit as the Russia invasion drags on, which should benefit Northrop Grumman.
Defense stocks generally gained Thursday. Amid the NATO meeting, U.S. President Joe Biden pledged another $800 million in military aid to Ukraine, on top of the $6.1 billion announced previously.
Other NATO countries are likely to boost military spending, as well, amid rising geopolitical tensions.
Defense contractor Northrop Grumman, an IBD Leaderboard stock, is also carving a new flat base amid other tailwinds.
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Northrop Grumman, Raytheon Edge Out Lockheed Martin
On June 24, Reuters reported that Northrop Grumman and Raytheon Technologies won key U.S. contracts to continue developing missiles to intercept hypersonic weapons. That means Lockheed Martin, the No. 1 defense contractor, has been eliminated for now from the multibillion dollar program.
Hypersonic weapons can fly at speeds five times the speed of sound and can maneuver midflight, making them hard to track.
In early May, Northrop Grumman completed a critical load test of the first B-21 Raider. The defense contractor expects the next-gen stealth bomber jet's first flight in 2023. The B-21s could replace Northrop's B-2s as well as Cold War era B-52s.
NOC Stock Tops Buy Point From 50-Day Bounce
Shares of Northrop Grumman popped 3.6% to 478.57 amid a broad decline on the stock market today. NOC stock rebounded from its 50-day moving average, topping an early entry a dime above Tuesday's high at 473.82.
An earlier June breakout past 477.36 failed. But there's heavy trading around that level, so investors could use that old buy point as another, slightly higher entry.
At the end of next week, NOC could finish a flat base with a 492.40 buy point, which is 10 cents above the June 7 high.
More broadly, shares of Northrop Grumman have basically consolidated since March. The relative strength line for NOC stock has shot to multiyear highs over this consolidation period and made a fresh high Thursday, according to MarketSmith chart analysis. A rising RS line shows outperformance vs. the S&P 500.
NOC stock sports a superior Relative Strength Rating of 96. That means it has outperformed 96% of all stocks in IBD's database over the past year.
The aerospace-defense stocks group, as a whole, ranks a strong No. 22 out of 197 industry groups tracked by IBD. Sector giant Boeing, which does have significant space and defense businesses, continues to struggle amid headwinds in commercial aviation. A defense-only group would likely show even-better performance.
Top aerospace and defense stocks surged after the Ukraine invasion, but have come under strain amid rapid inflation and the broader bear market.
Raytheon rose 3% and Lockheed Martin 2.7% Thursday. Defense stocks to watch also include General Dynamics, L3 Harris and Howmet.
Elbit Systems, an Israeli defense firm, popped 4.35% to 228.10, nearing a cup-base buy point of 239.07. ESLT stock has already cleared a trendline entry.
U.K. defense giant BAE Systems edged up 2 cents to 40.60, right around a 40.75 buy point.
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Northrop Grumman Earnings Poised For Relief
Defense stock Northrop Grumman earns a solid IBD Composite Rating of 87 out of 99. The Comp rating combines key fundamental and technical metrics in a single easy-to-use score.
Recent earnings declines weigh on the Composite score. That is reflected in Northrop's middling EPS Rating of 70 out of 99.
On a per-share basis, Northrop earnings fell the past two quarters and are expected to decline for another two, before rebounding in the fourth quarter of 2022, FactSet shows.
Over the past three quarters, Northrop EPS fell 0.6% on average. They grew 14% annually over the past three years.
Sales fell 4% last quarter. They grew 5% annually over the past three years.
Analysts polled by FactSet expect Northrop Grumman earnings to rebound 10% in full-year 2023 after declining 3% this year.
NOC stock shows one quarter of rising fund ownership, according to the IBD Stock Checkup tool. As of March, 1,698 funds owned Northrop stock, up 3% from end of 2021.
