NOC changes
Pick any two versions below to diff them.
- Price
- $519.86 → $550.96(+6.0%)
- 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. removed: 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. 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 margin for more than one quarter. The checks are clear. Segment margin must stay at about 11% 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 next evidence comes with the full-year 2026 results and the 2027 guidance in late January 2027. If margins hold and no new charge comes, the gap can close over the next three to five quarters. If fixed-price charges continue, the gap can stay into 2028.