Report Date: Tuesday, July 21, 2026, before market open | Call: 2026Q2 Earnings Call
| Last close (7/20/26) | ~$524 |
| 52-week range | $493.84 – $774.00 |
| YTD performance | ~-10.5% (vs. sharp underperformance since April) |
| Market cap | ~$75B |
| Consensus EPS (Q2) | ~$6.82–$6.84 (vs. $7.11 a year ago, -~4%) |
| Consensus revenue (Q2) | ~$10.78–$10.81B (+~4%) |
| FY2026 guidance (reaffirmed) | Sales $43.5–$44.0B; Segment OI $4,850–$5,000M; MTM-adj. EPS $27.40–$27.90; FCF $3.1–$3.5B |
Northrop enters this print in a genuinely unusual spot: fundamentals and backlog are arguably as strong as ever, yet the stock has been one of the worse performers among primes over the past few months, hit by a post-Q1 selloff, cooling geopolitical risk premia, and rotation out of names seen as "hot war" beneficiaries.
Q1 2026 was actually a beat-and-raise-adjacent quarter operationally: Q1 2026 revenue came in at $9.9 billion, beating the analyst estimate of $9.752 billion, and operating income jumped 73% to $989 million, with EPS surging 85% to $6.14. Management also reaffirmed its full-year 2026 financial guidance and disclosed that 2026 capital expenditures are expected to reach around $1.85 billion to fund B-21 capacity expansion.
Despite the beat, the stock sold off hard. Northrop Grumman shares declined sharply over the past 30 days, falling approximately 19% from around $680 to $549, driven primarily by a post-earnings selloff that overshadowed better-than-expected first-quarter results, as the market reacted negatively to elevated free cash flow usage and segment-specific headwinds despite revenue and earnings per share beating consensus forecasts. The specific triggers were higher-than-anticipated free cash flow usage of approximately $1.82 billion and a $71 million unfavorable estimate-at-completion adjustment in the Space Systems segment tied to a launch vehicle anomaly (GEM 63XL). Shares fell further in June as a U.S.-Iran interim peace accord that reopens the Strait of Hormuz and extends a ceasefire framework significantly reduced fears of near-term military escalation, prompting investors to unwind defense-sector geopolitical-risk premiums broadly.
Analysts are broadly modeling a modest EPS decline y/y against solid top-line growth. Northrop Grumman beat analysts' revenue expectations last quarter, reporting revenues of $9.88 billion, up 4.4% year on year, and this quarter the market expects revenue to grow 4.5% year on year, improving from the 1.3% increase it recorded in the same quarter last year. Guidance from management pointed to sequential acceleration: management previously stated that it expects "high single-digit sequential sales growth" in the second quarter, pointing to broad-based improvement across all four operating segments.
Key items for the print and call:
1. Cash flow cadence. After Q1's ~$1.8B free-cash-flow use, investors will be watching closely whether the ramp toward the $3.1–3.5B full-year FCF target is tracking. Management has said it expects Northrop Grumman to maintain its full-year 2026 guidance rather than raise or cut the outlook, but any signs of further deterioration in working capital or capex timing (the incremental ~$200M B-21 spend layered on top of the base plan) would likely draw scrutiny given how the market punished Q1's cash figure.
2. Space Systems margin/EAC risk. The GEM 63XL charge in Q1 raises the question of whether there are other estimate-at-completion adjustments lurking in the portfolio. Management said on the Q1 call it was comfortable there wasn't "anything else significant" giving rise to negative EACs, and that the segment should hold its ~11% margin guide for the year — that assertion will be tested again this quarter.
3. Sentinel and the Milestone B decision. The ICBM program remains the single largest program-execution watch item. Northrop's Matthew Dillow told Janes that previously stated timelines for the program are still on track, and the USAF is looking to achieve a Milestone B programme decision by the end of 2026, with initial launch still on track for 2027 and IOC in the early 2030s. Sentinel is roughly 6-7% of company revenue and was growing double-digits in Q1; investors will want confirmation the restructured program continues to avoid new cost overruns ahead of the year-end Milestone B re-certification.
4. B-21 production ramp economics. The Q1 agreement to boost B-21 production by 25% (with ~$2.5B of company-funded capex, mostly in 2027-2029) reshaped Aeronautics Systems' growth and margin trajectory. Expect updates on facility buildout progress, the Lot 4 LRIP execution, and any incremental EAC movement given the asset-sale accounting nuance introduced last quarter.
5. F/A-XX decision — the biggest looming catalyst, not this quarter's numbers. The Navy's sixth-generation fighter downselect between Northrop and Boeing is expected in August, just weeks after this print. The competition for the Navy's sixth-generation fighter contract has narrowed to Northrop Grumman and Boeing, and the Navy expects to choose the maker of its sixth-generation F/A-XX fighter in August. Management has flagged this as pure upside: "Regarding the financials, we'd expect upside to the sales and earnings from our current guidance, if we are entrusted to build the F/A-XX, and it would be a top priority for our company to do so." Expect analysts to press for any incremental color, though management will likely stay tight-lipped ahead of the actual award.
6. Competitive/industrial-base narrative — a real overhang. Northrop's absence from a marquee recent win is notable context: Air Force leaders gave initial production contracts to Anduril and General Atomics for collaborative combat aircraft, and Northrop Grumman's self-financed offering was not selected, with commentary framing it as historic — "The Air Force's decision marks the first time that a new company has won a fighter aircraft program since the 1970s." This feeds the broader Street narrative that the daily news digest flagged heading into the print — growing competition from startups, a shift toward lower-cost warfare platforms such as cheap drones, political and fiscal uncertainty, and margin pressures — even as global defense spending surges. Management will likely lean on its differentiated positions in weapons/SRMs, missile defense (~10% of sales each) and classified/restricted programs (growing faster than the core business) to counter this narrative.
7. Budget tailwinds remain intact. The macro backdrop is still supportive: the company faces headwinds... despite surging global defense spending. On the Q1 call, management highlighted that the FY2027 defense budget request was submitted at $1.5 trillion, a 44% increase over current levels, with strong bipartisan support — a data point likely to be reiterated as a longer-term demand underpin even if near-term sentiment has cooled.
Sentiment is genuinely split heading into the print:
On beat/miss odds, Zacks-style models lean positive: the company delivered an earnings surprise of 0.99% in the last reported quarter, and the model predicts an earnings beat this time, with the combination of a positive Earnings ESP and Zacks Rank increasing the odds of a positive surprise. More broadly, historically, NOC has outperformed EPS expectations 88% of the time and revenue forecasts 75% of the time over the past two years.
This is a "show me" quarter more than a binary catalyst event. The fundamental growth story — record backlog (~$96B), accelerating B-21 and Sentinel production, a fast-growing weapons/missile-defense mix, and a supportive multi-year defense budget trajectory — remains largely intact and was reaffirmed as recently as this quarter's guidance commentary. The stock's ~25-30% drawdown from its 2026 highs reflects (1) lingering unease about free cash flow timing and Space Systems EAC risk after Q1's stumble, (2) a broader defense-sector de-rating as geopolitical risk premia unwind, and (3) a sharpening competitive narrative around lower-cost, faster-moving entrants (Anduril, General Atomics) winning marquee unmanned programs. Investors should watch Q2 less for the headline EPS/revenue beat-or-miss (both are likely to come in roughly in line to slightly ahead, consistent with NOC's historical beat rate) and more for: free cash flow trajectory versus the full-year target, any incremental Space Systems EAC surprises, segment margin cadence (guided to improve through the year), and any forward commentary on the F/A-XX downselect, Sentinel Milestone B timing, and international order momentum — all of which will shape the multi-year re-rating debate far more than this single quarter's print.