Northrop Grumman Corporation Module 5 – Discounted Cash Flow - Alex Aponte Section 2 – Acct 70311
Brief Overview of Northrop • Northrop Grumman Corporation is a leading global security company providing innovative systems, products and solutions in a number of key segments.
Overview of Northrop Grumman • Founded: 1939 under the name “Northrop Aircraft Incorporated” • In 1994, acquired “Grumman Aeronautical to form Northrop Grumman. • Headquarters: Falls Church, VA • Major Customer: U.S. Government (90% of sales)
Four Segments of Northrop • Aerospace Systems – 36.5% of sales – design, development, integration and production of manned aircraft, unmanned systems, spacecraft, etc. • Electronic Systems – 25.5% of sales – designs, develops and manufactures solutions a variety of defense electronics and systems for controlling a military environment.
Segments (continued) 3. Information Systems – 26.9% of sales – focuses on cyber-security; C4ISR; intelligence processing; ad air ad missile defense. 4. Technical Services– 11.1% of sales - provides training solutions, logistics services, and advanced technology in missile defense, nuclear security, and simulations.
Thoughts • Estimated Intrinsic Value: $19,178 • Used common 10% cost of capital until further considerations factored in • Based on the Sum of PV of CF and the PV of continuing value, the company is declining in value • Company’s FCF dances around, but enterprise value tapers off heading into perpetuity
Thoughts / Questions (cont’d) • Company’s above-average EPM slows the decline seen in free cash flows going into the future • Questions remaining – can we realistically expect the company to continue with such a decline in sales? • Does the market value Northrop as seen in the discounted cash flows model?