Key Takeaways:
Northrop Grumman Corp. reported second-quarter earnings of $7.68 a share, topping the $6.84 consensus estimate, as the defense contractor raised its full-year outlook on record backlog growth.
"The company's backlog is surging to new records, thanks to robust global demand," Chief Executive Kathy Warden said.
Revenue rose 5% to $10.88 billion, beating the $10.78 billion average analyst estimate. The company posted an earnings surprise of 12.28%, marking its fourth consecutive quarterly beat. A year earlier, Northrop earned $7.11 a share on $10.35 billion in revenue.
Northrop now expects 2026 sales of $43.75 billion to $44.25 billion, up from a prior range of $43.5 billion to $44 billion. Adjusted earnings are forecast at $28.60 to $29.10 a share, compared with an earlier outlook of $27.40 to $27.90. The guidance raise signals management expects demand for advanced aircraft, missile defense and space systems to remain strong through the year.
The company saw growth across all four operating segments — aeronautics, defense, mission and space — though operating income fell 23% overall. The decline was driven primarily by a $231 million gain from a year-earlier divestiture and margin compression in defense systems and space units, where operating income dropped 38% and 16%, respectively.
Northrop shares have lost about 8.1% year to date, trailing the S&P 500's 8.7% gain. The stock carries a Zacks Rank of 4, indicating expectations of near-term underperformance based on analyst estimate revision trends.
The Sentinel intercontinental ballistic missile program remains a key long-term growth driver but also the company's biggest execution risk. The U.S. Air Force restructured the program after cost overruns and schedule delays, and discussions with the government on revised terms are ongoing. Any additional charges could pressure margins in coming quarters.
For the current quarter, analysts expect earnings of $7.02 a share on revenue of $10.97 billion. The guidance raise gives investors a clearer signal on the trajectory of Northrop's core programs. The next catalyst will be the company's investor day, where management is expected to provide updated margin targets and Sentinel program milestones.
This article is for informational purposes only and does not constitute investment advice.
