NOC changes
Pick any two versions below to diff them.
- Price
- $498.82 → $519.86(+4.2%)
- Discount category
- Well below intrinsic value → Below intrinsic value
- Next earnings
- Oct 20, 2026 → Jan 20, 2027
- Next earnings is estimate
- No → Yes
- About
- Northrop Grumman is one of the largest US defense companies. It reports four segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems. Its largest programs include the B-21 Raider stealth bomber, the Sentinel intercontinental ballistic missile, parts of the F-35, radars, electronic warfare, solid rocket motors, missiles and satellites. Most of its revenue comes from the US government, under cost-type and fixed-price contracts, and the rest from allied governments and some commercial space customers. It makes money from the margin on these contracts, and it books new awards into a backlog that it turns into revenue over many years. Backlog was a record removed: $104.7 added: $109.6 billion at removed: June added: September 30, 2026. For 2026, it guides sales of $43.75 billion to $44.25 billion.
- Thesis
- The market doubts that Northrop can turn its record backlog into profit. Several fixed-price programs cost more than planned. The company has booked about $2.0 billion of cumulative losses on the first production lots of the B-21 bomber, and in Q2 2026 it took a $68 million charge on the Stand-in Attack Weapon and a $91 million charge on the GEM 63XL rocket motor. Segment margin fell to 10.6% in Q2 2026 from 11.8% a year earlier. JPMorgan and TD Cowen said that a low tax rate of 6.3% gave most of the Q2 earnings beat. On September 29, 2026, the Pentagon chose Boeing for the Navy's F/A-XX fighter, so Northrop has no role in either US sixth-generation fighter program. Defense stocks also lost support in 2026 as the conflict with Iran moved away from active fighting. added: The Q3 2026 report on October 20, 2026 was a first good sign: segment margin went back to 12.1% with no new large charge, and Northrop raised its 2026 guidance for segment operating income and MTM-adjusted EPS. For the gap to close, Northrop must show that the backlog earns its planned removed: margin. added: margin for more than one quarter. The checks are clear. Segment margin must removed: return to added: stay at about 11% added: or more with no new large charges. Adjusted free cash flow must reach the 2026 guidance of $3.1 billion to $3.5 billion. The B-21 must ramp to the higher production rate agreed in early 2026 with no new loss. Sentinel must stay on its new schedule. The FY2027 defense budget must fund B-21, Sentinel and missile defense at the planned levels. The removed: first added: next evidence comes with the removed: Q3 added: full-year 2026 removed: report on October 20, 2026, added: results and the 2027 guidance removed: comes in late January 2027. If margins removed: recover added: hold and no new charge comes, the gap can close over the next removed: four added: three to removed: six added: five quarters. If fixed-price charges continue, the gap can stay into 2028.
- Balance sheet
- Cash: removed: $2.3B added: $3.7B Debt: $15.2B Net debt: removed: $12.9B added: $11.5B Interest cover: removed: 6.5× added: 7.0× Undrawn credit line: $3.0B, to September 2030 Debt due within 12 months: removed: $763M added: $764M Northrop funds itself with unsecured senior notes of the parent and with cash from operations. Cash removed: fell added: rose to removed: $2.3 added: $3.7 billion at removed: June added: September 30, 2026 from removed: $4.4 added: $2.3 billion at removed: December 31, 2025, added: June 30, 2026, because added: operating cash flow added: was $1.7 billion in Q3 2026. Cash flow is weak in the first part of each year: operating cash flow removed: was negative $376 million in added: for the first removed: half added: nine months of removed: 2026. added: 2026 was $1.4 billion. Debt added: at September 30, 2026 is long-term debt of $14.4 billion plus a current part of $0.8 billion. removed: There was no commercial paper at June 30, 2026, under a added: The $3.0 billion removed: program. added: credit line is the last figure from the Q2 2026 filing. Interest cover is operating income divided by interest expense for the first removed: half added: nine months of 2026. removed: Pension plan assets of $3.4 billion are more than the pension liabilities of $1.1 billion on the balance sheet. In the first removed: half added: nine months of 2026, Northrop paid removed: $684 million added: $1.0 billion of dividends and bought back only removed: $63 added: $68 million of stock, against removed: $872 million added: $1.2 billion a year earlier. The company also expects to invest about $2.5 billion over several years to expand B-21 capacity. As of removed: Jun added: Sep 30, 2026.
- Checkpoints
- Oct 20, 2026: Q3 2026 results: margins and program charges. removed: Pending. added: Passed. Watch: Segment margin near 11% with no new large charge on a fixed-price program, and 2026 guidance kept or raised, pass; new charges or lower cash flow guidance fail. added: Outcome: Segment margin was 12.1% with no new large charge, and Northrop raised its 2026 segment operating income and EPS guidance and kept its free cash flow guidance. Jan added: 20, 2027 (estimate): Full-year 2026 results and 2027 guidance. Pending. Watch: Adjusted free cash flow of $3.1 billion to $3.5 billion for 2026 and 2027 guidance with higher segment margin pass; free cash flow below guidance or lower margin guidance fails. 2027 (estimate): FY2027 defense appropriations for B-21, Sentinel and missile defense. Pending. Watch: Full funding for B-21 at the higher production rate, Sentinel and missile defense passes; cuts or a long continuing resolution that delays these programs fail.
- Recent events
- Oct added: 20, 2026: Northrop reported Q3 2026 sales of $11.1 billion, up 7%, and diluted EPS of $7.89. Segment margin was 12.1%, against 12.3% a year earlier, and the company reported no new large program charge. Net awards of $16.4 billion, including $2.0 billion for Sentinel, took backlog to a record $109.6 billion. Adjusted free cash flow was $1.8 billion in the quarter. Northrop raised its 2026 guidance for segment operating income to $4.94 billion to $5.04 billion and for MTM-adjusted EPS to $29.35 to $29.75. It kept sales guidance at $43.75 billion to $44.25 billion and adjusted free cash flow guidance at $3.1 billion to $3.5 billion. Oct 10, 2026: The first 21 Tranche 1 Transport Layer satellites that Northrop built for the Space Development Agency launched. They are part of a military communications network in low Earth orbit. Sep 29, 2026: The Pentagon chose Boeing over Northrop for the Navy's F/A-XX carrier-based sixth-generation fighter. Reports put the development contract at more than $20 billion. Northrop said that it waits for more information about the decision. On September 30, its stock fell 3.5% in mid-day trading, near its 52-week low. Sep 29, 2026: The US Air Force and Northrop broke ground on a new B-21 final assembly line at Air Force Plant 42 in Palmdale, California. The line supports the higher production rate agreed in early 2026. Sep 17, 2026: Northrop said that it will report Q3 2026 results on October 20, 2026, before the market opens. Aug 19, 2026: The board gave CEO Kathy Warden a one-time grant of a target 35,910 market stock units that vest by the end of 2031. The payout depends on the stock price: none if the stock falls more than 25%, and the target only if it rises at least 10%. Jul 21, 2026: Northrop reported Q2 2026 sales of $10.9 billion, up 5%, and diluted EPS of $7.68. Net awards of $20.0 billion, including $7.6 billion for Sentinel, took backlog to a record $104.7 billion. Segment margin fell to 10.6% from 11.8% after charges of $68 million on the Stand-in Attack Weapon and $91 million on the GEM 63XL rocket motor. It raised 2026 sales guidance to $43.75 billion to $44.25 billion and MTM-adjusted EPS guidance to $28.60 to $29.10, but kept its operating income and free cash flow guidance. The stock fell 2.2% that day. May 19, 2026: Northrop raised its quarterly dividend by 7% to $2.47 per share from $2.31, payable on June 17, 2026. Apr 21, 2026: Northrop reported Q1 2026 sales of $9.9 billion, up 4%, and diluted EPS of $6.14. It reached agreements with the US Air Force to increase B-21 production capacity and to bring forward Sentinel's initial operating capability. It expects to invest about $2.5 billion over several years in more B-21 capacity.