TenQ

The Northrop Grumman story

Northrop Grumman builds military aircraft, missiles, electronics and space systems, with the central question whether B-21 and Sentinel growth can turn record orders into cash without further program cost increases.

Northrop Grumman stock reportTenQ Score 23/36 · every chart and check from its filings
  • $519.86share price, last close
  • $73.9Bmarket value
  • 23/36TenQ Score checks passed
  • 8.3%growth a year the price assumes

The story in brief

  • Orders expand visibility. Backlog reached $104.7 billion at the end of the quarter to June 2026, supported by $7.6 billion in Sentinel awards.
  • Growth meets cost pressure. Aeronautics Systems sales grew 13 percent in the quarter to June 2026, but Defense Systems operating income fell 38 percent.
  • Cash expectations exceed history. The reverse DCF implies 7.2% annual growth in free cash flow after stock pay, compared with 3.5% delivered over the last 10 years.

What drives the business

  • Northrop Grumman's business rests on long-term government development, production and support contracts, with the U.S. government accounting for 84 percent of sales in 2025.
  • Aeronautics Systems develops and produces the U.S. Air Force's B-21 Raider and the U.S. Navy's E-130J TACAMO aircraft, whose growing volumes helped lift segment sales to $3,519 million in the quarter to June 2026.
  • Defense Systems includes Sentinel, the modernization of the ground-based U.S. nuclear deterrent, and the Integrated Battle Command System for the U.S. Army and Poland; Sentinel contributed $7.6 billion of the company's $20.0 billion in net awards in the quarter to June 2026.
  • Mission Systems supplies radar, communications, microelectronics and submarine systems, while Space Systems provides satellites, missile defense, launch propulsion and NASA cargo services.
  • Restricted programs generated $4.3 billion in awards in the quarter to June 2026, primarily at Aeronautics Systems and Space Systems, helping lift backlog from $95.7 billion at December 2025 to $104.7 billion at June 2026.

What the price assumes

At $473.46, the reverse DCF implies that free cash flow after stock pay grows 7.2% a year for ten years, using a 10.3% discount rate.

Northrop Grumman delivered 3.5% annual growth on that measure over the last 10 years, while the TenQ check sets a 3.8% bar, so the implied growth exceeds both.

The 5.4% free cash flow yield exceeds its historical 4.4%, but the price still requires faster cash growth than the company's long record.

Value NOC on your own assumptions

What could change the story

  • Program cost estimates remain consequential: the quarter to June 2026 included a $68 million unfavorable adjustment on the Stand-in Attack Weapon and a $91 million unfavorable adjustment on GEM 63XL.
  • Segment operating margin fell to 10.6 percent from 11.8 percent in the quarter to June 2026, as weaker Defense Systems and Space Systems margins outweighed improvement at Mission Systems.
  • Government funding remains a concentration risk, and the company's 2026 guidance excludes the effects of a prolonged government shutdown, spending limits or other spending cuts.
  • Adjusted free cash flow rose 54 percent to $978 million in the quarter to June 2026, mainly because of lower net cash tax payments rather than stronger program profitability.
  • Cash and short-term investments of $2.3 billion compare with total debt of $15.2 billion, while the near-term liquidity ratio of 1.17 falls below the TenQ check's 1.50 bar.

What to watch next

  • Northrop Grumman raised its 2026 sales guidance to between $43,750 million and $44,250 million and its MTM-adjusted earnings per share guidance to between $28.60 and $29.10.
  • It left 2026 segment operating income guidance at between $4,850 million and $5,000 million and adjusted free cash flow guidance at between $3,100 million and $3,500 million, making profit and cash conversion important tests of the higher sales outlook.
  • The next releases will show whether B-21 and E-130J volume growth continues, Sentinel awards translate into revenue, and cost estimates stabilize on the Stand-in Attack Weapon and GEM 63XL.

Sources

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