Key Highlights

  • NOC shares were trading up 6.43% at $543.47, against a prior close of $510.65.
  • Third quarter EPS of $7.89 topped a consensus of roughly $7.2.
  • Sales rose 7% to $11.1 billion, in line with expectations.
  • Backlog reached a record $109.6 billion on $16.4 billion of net awards.
  • Full-year MTM-adjusted EPS guidance rose $0.70 at the midpoint to $29.35 to $29.75.

Q3 Beat and Higher Profit Outlook Lift the Shares

Northrop Grumman (NYSE:NOC) shares were trading up 6.43% at $543.47 on Tuesday, against a prior close of $510.65, after the company reported third quarter results that beat on Earnings and raised its 2026 profit outlook. Earnings were $7.89 per share on a GAAP basis, up 3% from $7.67 a year earlier, and above a consensus of roughly $7.2. Sales rose 7% to $11.1 billion, in line with market estimates.

The Falls Church, Virginia-based contractor employs about 95,000 people and runs four segments covering aircraft such as the B-21 Raider, missile and weapons systems, radar and electronic warfare, and space systems. The U.S. government accounts for about 87% of its sales.

Management raised segment Operating Income guidance to $4.94 billion to $5.04 billion from $4.85 billion to $5.00 billion. MTM-adjusted EPS guidance moved to $29.35 to $29.75, while the sales range of $43.75 billion to $44.25 billion was left unchanged.

Aircraft and Missile Growth Outpaces Margins

Aeronautics Systems led the quarter, with sales up 14% to $3.6 billion and operating income up 24% to $377 million. Defense Systems sales rose 12% to $2.3 billion, while Mission Systems and Space Systems each grew 2%.

Profitability lagged sales. Segment operating income rose 5% to $1.35 billion, but the segment Margin slipped 20 basis points to 12.1%. Mission Systems operating income fell 3% to $500 million, against a prior-year period that included a $68 million favorable contract adjustment.

Net awards were $16.4 billion, a book-to-bill ratio of 1.5 times, including $2.0 billion for Sentinel, $1.4 billion for Virginia Class submarines and $1.3 billion for the F-35. Backlog stood at a record $109.6 billion.

Valuation Check and a Beat Helped by Tax and Pension Items

The stock carries a market Capitalization of $77.21 billion, a forward price-to-earnings ratio of 18.28 and a trailing ratio of 16.90, with trailing EPS of $28.15 and a Dividend Yield of 1.78%. Even after the move, shares trade roughly 30% below the 52-week high of $774.00, and well above the low of $470.06.

The shares had been down about 10% year to date before today, pressured by research firm price-target cuts and the loss of the F/A-XX fighter competition. Peer RTX (NYSE:RTX) also beat estimates and raised its outlook this session.

Part of the per-share beat came below the segment line. The effective tax rate fell to 13.4% from 16.9% on higher research credits, and the non-operating pension benefit rose to $167 million from $136 million.

Cash Flow Conversion Is the Next Test After a Strong Print

Adjusted free Cash Flow of $1.81 billion rose 44%, but it included $371 million of proceeds from an equipment sale to a customer. The full-year target of $3.1 billion to $3.5 billion implies roughly $2.1 billion to $2.5 billion in the fourth quarter, after $965 million over nine months. Investors may watch whether cash conversion, Mission Systems margins and program awards support the higher outlook.