| BUSINESSWEEK ONLINE : NOVEMBER 1, 1999 ISSUE | ||||||||
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| BUSINESSWEEK INVESTOR -- INSIDE WALL STREET
A Northrop Co-Pilot? The once high-flying Northrop Grumman (NOC), fourth-largest U.S. maker of weapons and aircraft--including the B-2 Stealth bomber--is flat on its back. The stock is at its 52-week low of 54 and down from 75 in mid-July. An aborted merger last year with Lockheed Martin, production woes, and lack of new sources of revenue have caused investors to bail out. But not everyone has given up on the company. Some big investors think Northrop is now an enticing value play, and some analysts think it's on the way to a turnaround. Plus Northrop is one of the few aerospace companies still attractive to European aircraft outfits--and to larger U.S. companies with interests in aircraft and defense electronics systems. ''With the consolidation in European aerospace, Northrop has emerged as the top buyout choice for the likes of British Aerospace,'' says a New York money manager who has been accumulating shares. Analyst Joseph Nadol of Donaldson, Lufkin & Jenrette Securities says the potential link with a European company could boost the stock. ''The Pentagon has recently indicated it would permit transatlantic mergers with defense contractors,'' says Nadol. Such a merger would be permitted with only a few European companies, he says, ''but such a transaction does look possible now.'' Nadol puts the intrinsic value of Northrop at 136 a share, based on his discounted cash-flow valuation. His 12-month target for the stock: 80. In the U.S., the betting is that General Dynamics would be the most suitable buyer. One analyst says it is seeking acquisitions to bolster its capabilities in missiles, aviation, and space products--fields Northrop is in. General Dynamics declined comment. Northrop Chairman and CEO Kent Kresa says ''we are positioning our company for long-term success,'' as an independent company. By GENE G. MARCIAL _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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