In light of Northrop Grumman’s (NOC) strong third-quarter financial results and its multiple, very promising initiatives, NOC’s outlook appears to be quite positive.
In conjunction with the attractive valuation of NOC stock, these factors make the shares worth considering for conservative investors.
Admirable Q3 Results
Last quarter, NOC’s free cash flow surged a huge 72% versus the same period a year earlier to $1.256 billion, while its earnings per share increased by a substantial 10% year-over-year (YOY) to $7.67. Also noteworthy is that the revenue of its Defense Systems unit advanced 19% YOY, excluding the impact of acquisitions and divestments, while its international sales advanced 32% YOY. The latter increase indicates that Northrup’s products are becoming more attractive to foreign countries, enabling the firm to gain tremendous traction in those markets.
Overall, NOC’s revenue increased 5% in Q3, excluding acquisitions and divestments. But aside from its space program, which faced a difficult comparison due to the discontinuation of two major programs, the company’s top line increased by about 9% YOY.
Multiple Programs With Very High Potential
In September, the second of NOC’s new B-21 Raider bomber underwent a test flight. And in fiscal 2026 alone, Congress and the Air Force are reportedly looking to shell out $10.3 billion on the aircraft, while the Air Force is making the necessary preparation to get NOC to accelerate the production of the plane.
“We continue discussions with the Air Force on the framework for an agreement to accelerate the B-21 production rate,” NOC CEO Kathy Warden said on the company’s Q3 earnings call in September.
Moreover, in March U.S. Strategic Command commander, Air Force Gen. Anthony Cotton, citing a deteriorating “geopolitical environment,” pushed for the service branch to acquire 145 of the planes, up from the previous target of 100. Although Cotton is slated to retire this year, his statement likely reflects the Pentagon’s view, since officials rarely publicly contradict their agencies’ opinions.
Also importantly, the U.S. Army has described NOC’s Integrated Battle Command System (IBCS) as “the cornerstone of air and missile defense modernization efforts,” with Army Brig. Gen. Frank Lozano, Program Executive Officer Missiles and Space, explaining that the system is “the critical mission command component of our Army’s modernized air and missile defense capabilities.”
Given the Army’s enthusiasm for the IBCS, the system could very well be utilized in conjunction with the Trump administration’s expansive Golden Dome anti-missile initiative, generating a great deal of additional revenue for Northrop. And suggesting that the IBCS could also be very appealing to multiple U.S. allies, Poland in September “conducted a successful operational exercise for its IBCS-enabled WISŁA medium-range air defense system.”
Finally, providing NOC with another growth engine is Amazon’s (AMZN) Kuiper, which is supposed to provide internet service from space. In Q3, NOC’s rocket boosters “delivered the third batch of Amazon Kuiper satellites to orbit,” Warden reported. And with additional launches in backlog, the Kuiper program is poised to be a key growth driver for the company going forward,” the CEO asserted.
Indeed, depending on the extent that AMZN expands Kuiper, the program could become a very strong, positive catalyst for NOC. And since providing widespread internet service could prove to be extremely lucrative for Amazon, the latter scenario could very well materialize.
Valuation and the Bottom Line on NOC Stock
Northrop is changing hands at a forward price-earnings ratio of 20.7 times. In light of the firm’s multiple, strong growth engines and the fact that analysts, on average, predict that its EPS will jump to $28.88 in 2028 from $26.06 this year, the firm’s valuation is attractive.
Due to NOC’s size, the shares are unlikely to soar by tremendous amounts over the next year or two. But with NOC likely to provide very solid returns during that period, it appears to be very well-suited for long-term investors.
*This article is intended to be informational only; it is not financial advice.
