Northrop Grumman Completes HII Spin-Off, Morgan Keegan Maintains Market Perform

Morgan Keegan has published a research report on Northrop Grumman Corporation (NYSE: NOC) after the company announced it's completion of the Huntington Ingalls spin-off on March 31.

In the report, Morgan Keegan writes "We expect Huntington Ingalls to have flattish revenue over the next several years, but see the potential for solid earnings growth from operational improvements. We have developed preliminary estimates of $6,730 million in revenue, $442 million in EBITDA, and $1.98 in EPS in 2011 going to $6,860 million, $781 million, and $6.46 in 2015. We have examined potential valuation for the company based on other U.S. defense contractors, historical acquisitions of shipyards, our expectations of long term steady state financial performance, and a DCF. We see shares of the new company fairly valued in a range of $25 - $48. However, given the distribution we believe shares of HII could start trading at the low end or a discount to this range in the near term."

Morgan Keegan maintains its Market Perform rating and $65 price target.

Northrop Grumman Corporation closed yesterday at $68.21.