WASHINGTON — During its third-quarter earnings call Oct. 24, Northrop Grumman announced solid sales numbers, a spike in sector operating profit and a higher operating income.

Yet, after warning of headwinds of as much as $400 million earnings stemming from pension liability, investors on Wall Street “ran for the exits," in the words of market consultant Jim McAleese.

For the full week of Oct. 22, Northrop stock fell 13 percent to about $270 per share — even as Northrop CEO Wes Bush said the company’s “programs continue to be well-supported in the budget, and our portfolio is well-balanced between mature franchise production efforts and the development programs that will ultimately lead to the next generation of production programs.”

This is not the first time Wall Street has responded en masse to nuances in defense contracting. But what forces are causing investors to drop Northrop stock in this case?

Broadly speaking, there has been a selling off of defense stock, “if for no other reason that sentiment is shifting and there is a de-rating,” according to Jonathan Raviv, an aerospace and defense industry analyst at Citi Group.

More specifically to Northrop, despite being applauded for its acquisition of Orbital ATK earlier this year, the legacy Northrop portfolio “is growing slower right now than some of its peers because there are still some elements that are going through portfolio reshaping or programs ramping down,” Raviv said.

“Slower organic growth might be weighing on things in terms of how people are viewing the stocks," he added. “From the earnings perspective, it has nothing to do with the cash spent on Orbital, just the accounting dynamic."

Now that Northrop owns Orbital, investors will likely keep a watchful eye on the rate at which Northrop can amortize, or write off the initial cost.

Upcoming changes in Northrop leadership are also making investors antsy about investing in the company. According to Raviv, “any time you have some sort of change, especially from someone investors have gotten very comfortable with, that generally creates a nervousness, especially if you have big programs ramping up, like, B-21."

“No one likes change, and the timing might have been a surprise as oppose to the actual decision,” he added.

To offset these losses, Northrop announced in October a $1 billion accelerated share repurchase with Goldman Sachs. The company later said it will receive 3 million shares on Oct. 31, 2018, approximately 80 percent of the shares it expects to buy back under the program. (Companies often engage in stock buy-back agreements when they feel their stock is undervalued.)

Northrop has engaged in repurchase agreements before, so this is “nothing particularly new for this company,” Raviv said. But “they’re certainly sending a message, putting some money where their mouth is.”

Similar to Northrop, investors chose to place their money elsewhere after Lockheed Martin confirmed during its earnings call that the company could not effectively compete with Boeing for the U.S. Air Force’s $9.2 billion T-X trainer and $2.4 billion UN-1N Huey replacement contracts, or the Navy’s $805 million MQ-25 aerial fueling drone contract.

Justifying the decision, Lockheed CEO Marillyn Hewson said matching the winning prices would have led to cumulative losses across all three programs in excess of $5 billion, "an outcome that we do not feel would have been in the best interest of our stockholders or our customers.”

McAleese noted that Boeing did announce $691 million of new third-quarter charges for winning the contracts.

But the stock market presumably opted to look long term, rewarding Boeing with a 3 to 4 percent bump in the stock price, at about $359 per share at close on Oct. 26.

Daniel Cebul is an editorial fellow and general assignments writer for Defense News, C4ISRNET, Fifth Domain and Federal Times.

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