We're in the thick of earnings season right now. The space and defense stocks we cover report last week and this. We made a couple nice calls on two stocks in the last two days, being Northrop Grumman (NOC) and ManTech International (MANT). Both rose on earnings today and we had the good fortune of flagging the high of the day for subscribers wanting to take profits on the latter. Below we walk you through the numbers, what happened and how we got there.
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ManTech International (MANT) - Reported Last Night
We cover this company in our "Fundamentals" service. We'll include it in our Pro service soon.
Perenially underestimated, the company delivered yet another strong quarter on every line. Backlog, revenue, earnings, cashflow, deleverage, all were strong. We posted on its earnings yesterday - you can read that post ("How To Play Cybersecurity For Only 1.1x Revenue") here: https://blog.cestrianpro.com/how-to-play-cybersecurity-for-only-1.1x-revenue.
The stock doesn't trade much in post- or pre-market so it moved only a little before the open today. But come the open, it moved. Here's what happened.
Source: Interactive Brokers LLC, Cestrian Analysis.
We think the stock has plenty of upside yet in the coming months.
Northrop Grumman (NOC) - Reported This Morning
We cover NOC at both Pro and Fundamentals levels. If you're a Pro subscriber, you already have access to our recent work on the company. If you're not yet a subscriber, you can purchase the Pro note on a one-time basis by clicking HERE. (We'll refund the cost of the purchase against your Pro subscription fee, if you choose to join).
NOC is in line to book wins from two very large federal defense programs - the innocuous-sounding "Ground-Based Strategic Deterrent", which is a c.$85bn (yes you read that right) Air Force contract to renew the ageing Minuteman III nuclear missile arsenal, and the B-21 strategic bomber rollout. GBSD is imminent; B-21 bookings ought to start during 2022. The market has more or less forgotten about GBSD, or perhaps has discounted it in case the White House changes hands and the priority of replacing an ageing, difficult to service, 50 year old nuclear defense system drops down the list or is cancelled. So NOC's stock has languished somewhat - incorrectly in our view.
Q2 was a strong quarter on all levels. Again, backlog, revenue, earnings, cashflow and deleverage were all strong. Plus on the earnings call there were noises along the lines of some initial elements of GBSD likely to drop into backlog come Q3.
The stock moved up to a peak of 5% during the day. It's up 4% in post-market trading at the time of writing. We have NOC rated at Buy - Long Term Hold both before and after earnings. We think this one is a long-run winner.
All in all - today was a good day.
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Disclosure: Cestrian Capital Research, Inc staff hold personal account long position(s) in MANT and NOC.