On Tuesday, Northrop Grumman Corp. Northrop Grumman (NOC) reported upbeat first-quarter fiscal year 2026 results, with both earnings and revenue exceeding the consensus. But the company kept its full-year guidance unchanged, which came in a bit below what analysts were hoping for.
Northrop Grumman Says Defense Spending Could Reach Cold War Era Levels
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Northrop Grumman posts Q1 FY26 earnings and revenue above estimates, driven by strong defense demand and missile systems growth.
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Earnings Snapshot
EPS of $6.14 beat the analyst consensus estimate of $6.09, and sales of $9.881 billion topped the street view of $9.752 billion. Organic sales rose 5%, driven by modernization efforts and strong demand in the defense sector. Northrop disclosed total awards of $9.8 billion in the quarter and ended the period with a backlog of $96 billion.
The company reiterated its fiscal year 2026 sales outlook of $43.50 billion to $44.00 billion, against a $43.908 billion estimate. It also affirmed adjusted EPS guidance of $27.40 to $27.90, versus the analyst estimate of $28.01. So while the quarter itself was a beat, the forward guidance suggests a slightly more cautious view.
Conference Call Takeaways
Northrop Grumman disclosed that it is expanding annual production capacity on the B-21 aircraft by 25%. The company says the outlook remains positive, with expected higher global defense spending and strong demand for missile defense systems and advanced interceptors.
NOC said the administration recently proposed a $1.5 trillion defense budget for fiscal year 2027, prioritizing modernization and reflecting a 44% increase over current spending levels. The plan includes a $1.1 trillion base budget, roughly 30% higher than FY26. It maintains funding for major programs such as B-21, Sentinel, IBCS, and E-2D, along with several classified projects. If implemented, total defense spending would reach about 5% of GDP, up from around 3% in recent years and closer to Cold War-era levels.
For 2026, the company expects growth to accelerate throughout the year in line with 2025 trends. For the second quarter, NOC expects sales to grow in the high single digits sequentially, with broad-based growth across all segments for the full year. Operating income is expected to remain strong, with margins in the low-to-mid 11% range and gradual improvement over the year driven by mix, timing, and execution. The company now expects $1.85 billion in 2026 capex, including an additional $200 million to support B-21 production capacity.
Analyst Consensus & Recent Actions
Northrop Grumman stock carries a Buy rating with an average price target of $740.90. Recent analyst moves include:
- Jefferies: Hold (Raises Target to $710.00) (April 9)
- Citigroup: Buy (Raises Target to $807.00) (April 2)
- Wells Fargo: Initiated with Overweight (Target $800.00) (April 1)
Top ETF Exposure
- iShares US Aerospace & Defense ETF ITA: 4.58% Weight
- Global X Defense Tech ETF SHLD: 4.81% Weight
- Invesco Aerospace & Defense ETF PPA: 5.30% Weight
Because NOC carries significant weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock.
Stock Price Activity
Northrop Grumman shares were up 0.80% at $616.00 during premarket trading on Wednesday, according to market data.
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