Earnings
Northrop Grumman lifts EPS outlook as backlog climbs to $109.6 billion
Third-quarter sales rose 7% on aircraft and missile demand, while $16.4 billion of new awards pushed book-to-bill to 1.5.
HedgeWeekly News Desk ·
Northrop Grumman raised its 2026 earnings forecast on Tuesday after third-quarter sales grew 7% to $11.12 billion from $10.42 billion a year earlier, according to results filed with the SEC. The defense contractor now expects mark-to-market adjusted EPS of $29.35 to $29.75, up from a prior range of $28.60 to $29.10.
Growth was led by Aeronautics Systems, where sales rose 14% to $3.58 billion on higher B-21 bomber volume and a $195 million increase in F-35 work. Defense Systems sales climbed 12% to $2.31 billion as the Sentinel missile program ramped up, while Mission Systems and Space Systems each grew 2%.
Profit lagged the top line. Operating income rose 2% to $1.27 billion and diluted EPS increased 3% to $7.89 from $7.67. Net awards totaled $16.4 billion, a book-to-bill ratio of 1.5, lifting backlog to $109.6 billion at September 30, 15% above its level at the end of 2025. Large awards included $2.0 billion for Sentinel, $1.4 billion for Virginia-class submarines, $1.3 billion for the F-35 and $1.0 billion for the E-2.
For investors, the gap between 7% sales growth and 2% operating income growth is the number to watch, since it points to thinner margins on the fastest-growing programs. Cash flow also needs a closer read: adjusted free cash flow jumped 44% to $1.81 billion, but that included $371 million from a customer equipment sale. Full-year guidance now calls for $43.75 billion to $44.25 billion of sales and $3.1 billion to $3.5 billion of adjusted free cash flow, with segment operating income raised to $4.94 billion to $5.04 billion.