Barron's Says Decline in Northrop Grumman's (NOC) Stock Looks Overdone

Barron's highlighted shares of Northrop Grumman (NYSE: NOC) in this weekend's edition of the publication, pointing out that while the stock has been beaten up in the last year, the company has one of the strongest pipelines in the defense sector.

Among the largest defense stocks, including Lockheed Martin (NYSE: LMT), Boeing (NYSE: BA) and General Dynamics (NYSE: GD), shares of Northrop have fallen the furthest in the last year -- down nearly 60% from the 2008 peak. The slide began last year as candidate Obama began looking more like the presidental victor and investors began speculating that he would slash the U.S.'s defense spending. On the other hand, however, the recent release of the federal budget now shows that Obama will actually increase spending by about 4% a year for the next several years.

The Barron's article points to several more factors which should bode well for the depressed defense stock:

• a $78 billion order backlog, twice Northrop's expected '09 sales level.
  
• a diversified portfolio, including operations in information systems, aerospace, shipbuilding and electronic systems, among other units.
  
• a budget provision which will devote hundreds of millions to satellite system to monitor climate change, something that Northrop has been working on for years.
  
• an $35 billion order from the Air Force to build a new generation of aerial refueling tankers.
  
• a double-digit long-term growth rate, but a stock that only trades at 7x expected earnings.
  
• a dividend which yields 4.6%.

Despite the positive Barron's article, shares of Northrop are trading relatively flat this morning. The stock is currently up about 0.12% to $34.58.

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