Nomura Value Fund on Northrop Grumman Corporation
Thesis
Northrop Grumman pulled back after strong defense-sector gains and concerns about elevated capital expenditures and a contract charge. The fund believes those capital investments support future revenue and cash-flow growth because they primarily back Northrop's role in the US nuclear triad program. A growing order backlog reinforces the team's view that the long-term defense story remains strong.
“Another reason the long-term story for Northrop remains strong, in our view, is that the company’s order backlog continues to show impressive growth.”
Key risks
- High capital expenditures weighing on near-term free cash flow
- Inflation and supply-chain challenges affecting contract economics