Merrill Lynch Raises Price Targets on 4 Blue Chips That Beat Estimates

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Northrop Grumman

This top defense company was ranked as one of the top five defense contractors by sales last year. Northrop Grumman Corp. (NYSE: NOC) provides innovative systems, products and solutions in unmanned systems, cyber, C4ISR and logistics and modernization to government and commercial customers worldwide. The Aerospace Systems segment designs, develops, integrates and produces manned aircraft, unmanned systems, spacecraft, high-energy laser systems, microelectronics and other systems and subsystems.

The Information Systems segment offers advanced solutions for Department of Defense, national intelligence, federal civilian, state, international and commercial customers. The Technical Services segment provides logistics, modernization and sustainment services, as well as other advanced technology and engineering services.

This defense and aerospace giant also smashed earnings estimates and raised its guidance. The analysts noted this in their report:

The company reported first quarter diluted earnings-per-share from continuing operations of $3.63, above the consensus mean of $2.92. The beat in the quarter was driven by lower tax and better than expected revenue. Management raised 2017 EPS guidance to $11.80-12.10 from $11.30-11.60.

Shareholders of Northrop Grumman are paid a 1.45% dividend. The $265 Merrill Lynch price target was raised to $295. That compares with a consensus target of $258.06. The stock closed most recently at $248.40.

United Technologies

This is a very diversified company with large government contract exposure, and it is also on the Merrill Lynch US 1 list of high conviction stock picks. United Technologies Corp. (NYSE: UTX) is an industrial that provides high-technology products and services to aerospace industries and building systems worldwide. Its segments are UTC Climate, Otis, Controls & Security, UTC Aerospace Systems and Pratt & Whitney.

Many Wall Street analysts believe the company is strategically positioned to benefit from two megatrends in the long-term: urbanization and commercial aerospace. The company received good news recently as the military and foreign buyers are set to increase purchase of the F-135 Jets. UTC’s Pratt & Whitney division, which builds the F135 engine for the military, earns a superb 22.5% profit margin on its products.

This is another top blue chip that surpassed estimates, and the analyst said this in a recent report:

United Technology reported first quarter adjusted earnings-per-shares of $1.48 versus the Merrill Lynch estimate of $1.41 and the consensus estimate of $1.39. Management reaffirmed 2017 EPS from continuing operations outlook of $6.30-$6.60 on $57.5 to $59 billion in sales.

UTC investors are paid a solid 2.22% dividend. A $10 boost in the Merrill Lynch price target brought it to $140. The consensus target is down at $118.66, and the shares closed Thursday at $118.78 apiece.

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The strong market rally has lifted many of these companies, so investors may consider buying partial positions and seeing if the market pulls back some. However, beating estimates and raising guidance makes them a good bet going forward.