Northrop Grumman Corporation (NOC) Earnings & Analysis

Latest quarter

Northrop Grumman reported Q3 FY2026 revenue of $11.1 billion, up from $10.4 billion a year earlier and 0.57% above the consensus, although both figures round to $11.1 billion. Adjusted earnings per share were $7.89, 9.28% above the $7.22 consensus; diluted EPS rose from $7.67 a year earlier.

The company’s filing said sales increased across all four sectors. Aeronautics Systems grew 14%, helped by F-35 production and sustainment, B-21 sales and B-2 sustainment. Defense Systems grew 12%, led by Sentinel and higher tactical rocket-motor volume, partly offset by lower ammunition sales.

Northrop’s operating margin fell to 11.4% from 11.9%, principally because of a lower FAS/CAS pension operating adjustment, according to the filing. CFO John Greene said adjusted free cash flow was $1.8 billion, supported by working-capital improvements and $371 million of proceeds from the sale of a B-21 test asset.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Kathy Warden said demand for defense capabilities remained global and that Northrop was investing in missile and munitions capacity. She reported a quarterly book-to-bill ratio of 1.5 times and backlog of $110 billion. CFO John Greene said awards included $4.6 billion on restricted programs and an additional $2 billion on Sentinel.

Warden said Sentinel had completed the first full vertical assembly of an inert missile and received Air Force approval on design maturity for a first flight in 2027. She said the company would continue development of the missile, launch facilities and command-and-control systems before beginning to ramp production toward the end of the decade.

Asked about B-21 capacity, Warden said investment would continue over the next couple of years, with higher volumes expected later in the decade. She said testing and production learning were progressing, but added that the remaining low-rate initial production units still carried risk.

On margins, Greene said a larger B-21 share of sales would put some pressure on Aeronautics Systems’ margin. Warden said development work carries greater risk and tends to have lower margins than production; she expects the portfolio to shift toward more production over the rest of the decade.

Warden also said Northrop was reviewing how to bring microelectronics technologies into commercial applications. Asked about alternatives, she said the company could continue investing independently, broaden its investment base or consider a separation. She said it was premature to quantify the investment needed because it would depend on the pace of technical milestones and the company’s appetite for scaling.

For the quarter ahead, Greene said Northrop expected higher sales across the portfolio, driven by production throughput, material volumes and normal seasonality. On the 2027 sales-growth range, Warden said the timing and level of government appropriations, international awards and production ramps would influence the outcome.

Guidance

Northrop raised its FY2026 mark-to-market-adjusted EPS guidance to $29.35–$29.75 from $28.60–$29.10. Greene said the increase reflected higher segment performance and a lower tax rate, partly offset by higher corporate costs and interest expense.

Greene raised the midpoint of segment operating-income guidance by $65 million, to $4.94 billion–$5.04 billion. He also raised the expected Aeronautics Systems operating margin to the high 9% range and the Mission Systems margin to the mid 15% range.