Northrop Grumman Corporation
NOC
$525.25
-0.02%
Northrop Grumman is a diversified defense prime contractor operating across four segments — Aeronautics Systems (manned/autonomous aircraft including the B-21 Raider and F-35 fuselage work), Defense Systems (missiles, ammunition, and missile defense), Mission Systems (radar, avionics, and C4ISR), and Space Systems (satellites, sensors, and rocket motors) — serving the U.S. Department of Defense and allied governments. As one of only a handful of U.S. prime contractors with end-to-end nuclear triad, stealth aircraft, and space franchise positions, it occupies a strategically irreplaceable niche defined by long-cycle, cost-plus and fixed-price development programs rather than commercial competition. The current investor debate centers on the B-21 production ramp and whether classified 'restricted' program charges are contained, alongside a notable setback from losing the Air Force's Collaborative Combat Aircraft (CCA) hardware award — a loss management is attempting to offset with the self-funded Talon Blue drone and a software-centric autonomy role. Recent headlines and a strong Q3 print (revenue +6.7% YoY, EPS of $7.91) have reframed the narrative from 'execution risk' toward 'backlog visibility and margin recovery,' though the stock's weak one-year relative performance versus the S&P 500 keeps valuation and program concentration at the center of the argument.…
NOC
Northrop Grumman Corporation
$525.25
Related headlines
Investment Opinion: Should I buy NOC Today?
Rating: Buy (accumulate), with position sizing discipline. The core thesis is that Northrop's margin trough is behind it — operating margin recovered from 6.05% in Q1 2025 to 11.41% in Q3 2026 — while the stock has de-rated to 18.38x forward earnings, and the 24-analyst consensus (15 Buy / 10 Hold / 1 Sell, mean 2.0) carries a $636.00 average target, +15.6% above the $550.30 price. The Street is paying for backlog visibility and B-21 ramp execution, not for momentum, which is precisely the setup where a de-rated prime with a fresh positive inflection (+15.13% one-month return versus -1.99% for SPY) offers asymmetric risk/reward.
Supporting evidence is concrete: Q3 2026 revenue of $11.122 billion grew 6.71% YoY with a steady sequential build ($9.881B → $10.876B → $11.122B), gross margin expanded from 19.50% in Q2 to 21.15% in Q3, and net margin rose from 8.86% in Q1 to 10.11% in Q3. TTM free cash flow of $3.829 billion on an $81.8 billion market cap is a 4.7% FCF yield, funding a 1.58% dividend at a conservative 30.9% payout, while the 18.38x forward PE sits in the lower-middle of a five-year 10x–38x band and below the 27.69x recorded in Q1 2026. The $37.87 consensus EPS estimate implies low-teens growth off roughly $33–34 of trailing earnings power, and the $636 target implies +15.6% upside — a gap consistent with a name the Street likes but has not chased.
The thesis would be invalidated by three things: a fresh restricted-program charge on B-21 or Sentinel that pushes operating margin back toward the 6% trough, further CCA-related revenue disappointment beyond the already-lost hardware award, or a break below the $470.06 52-week low that confirms the October bounce failed. This Buy would downgrade to Hold if forward PE re-rated above ~22x without matching EPS revisions, or to Sell if quarterly operating margin fell back below 9% or the $430 analyst low target came into play. Conversely, it would upgrade to a higher-conviction Buy on a breakout above the $585–$589 August highs accompanied by B-21 production-margin disclosure. Verdict: fairly valued to modestly undervalued relative to its own history, roughly in line with defense peers on earnings, and not cheap on book (4.91x P/B) or PEG (7.41) — a value-with-a-catalyst holding, not a bargain.
Sign up to view all
NOC 12-Month Price Forecast
The forward view is constructive but not euphoric: Northrop is a de-rated defense prime whose margin recovery is now visible in the numbers, with Q3 2026 operating margin of 11.41% versus the 6.05% trough and revenue growing 6.71% YoY against a $56.5 billion consensus. At 18.38x forward earnings the market has stopped pricing optimistic B-21 execution, and the $636 average target implies +15.6% upside — a gap that reflects fundamental approval without momentum chasing. The 90% wide $430–$815 target range is the honest caveat: genuine disagreement about B-21 margins and restricted-program charges means the low end, not the average, is the relevant anchor if execution disappoints. I would upgrade to high confidence on a breakout above the $585–$589 August highs with B-21 margin disclosure, and downgrade to neutral if operating margin slips back below 9% or a new program charge emerges.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Northrop Grumman Corporation's 12-month outlook, with a consensus price target around $636.00 and implied upside of +21.1% versus the current price.
Average Target
$636.00
26 analysts
Implied Upside
+21.1%
vs. current price
Analyst Count
26
covering this stock
Price Range
$430 - $815
Analyst target range
Coverage is deep and the consensus leans bullish: 24 analysts with a distribution of 15 Buy, 10 Hold, and 1 Sell produce a recommendation mean of 2.0 (Buy) and an average target price of $636.00. Against the current $550.30, that implies +15.6% upside to consensus — a meaningful but not euphoric gap that is consistent with a stock the Street likes fundamentally but has been unwilling to chase after the drawdown. The 15-to-10 Buy/Hold split signals conviction is real but not unanimous, and the single Sell suggests the bear case is a minority view rather than a credible alternative thesis.
The target range of $430 to $815 is exceptionally wide — a 90% spread from low to high — which itself is the most informative datapoint: it signals genuine disagreement about B-21 margin outcomes, restricted-program charges, and the revenue impact of losing the CCA hardware award. The $815 high target implies multiple expansion back toward the stock's 2025 peak valuation alongside successful B-21 production ramp and autonomy/software wins (Talon Blue), while the $430 low discounts margin compression and further program charges. Institutional actions are mixed but skew constructive at the margin: Baird upgraded to Outperform from Neutral on October 21, while Barclays maintained Underweight and Bernstein and JPMorgan stayed at Market Perform/Neutral — a pattern of selective upgrading rather than broad-based re-rating. With a $37.87 consensus EPS estimate and a $56.5 billion revenue estimate, the Street is modeling continued mid-single-digit growth; the wide dispersion means position sizing should account for the possibility that the low end, not the average, is the relevant anchor if program execution disappoints.
Bulls vs Bears: NOC Investment Factors
The bull case currently has the stronger evidence: margins are inflecting (operating margin up from 10.08% to 11.41% sequentially), revenue is accelerating at 6.71% YoY, and the stock has de-rated to 18.38x forward earnings — the lower-middle of its own historical band — while consensus targets imply 15.6% upside. The bear case rests less on current fundamentals than on unresolved program risk: the CCA hardware loss, the possibility of further restricted-program charges, and a 90% wide analyst target range that runs as low as $430. The single most important tension is whether B-21 production ramp margins hold — if they do, the margin recovery is durable and the de-rating looks overdone; if another charge emerges, the $430 low target becomes the relevant anchor and the one-month 15.13% rally reverses. Momentum has turned positive (+17.12pp relative strength versus SPY over one month), but with the stock at only 26.4% of its 52-week range and still down 4.36% over a year, this is a basing value-with-a-catalyst setup rather than a confirmed trend.
Bullish
- Margin recovery is the key inflection: Operating margin expanded from 10.08% in Q2 2026 to 11.41% in Q3 2026, and net margin rose from 8.86% in Q1 2026 to 10.11% in Q3 — a clear signal that the charge-driven trough (Q1 2025 operating margin of just 6.05%) is behind the company. Gross margin of 21.15% in Q3 versus 19.50% in Q2 shows fixed-price production programs are maturing into operating leverage.
- Revenue accelerating at 6.7% YoY: Q3 2026 revenue of $11.122 billion rose 6.71% over Q3 2025's $10.423 billion, with a steady sequential build from $9.881B (Q1) to $10.876B (Q2) to $11.122B (Q3). That growth rate is at the upper end for a prime of this size and supports the $56.5 billion consensus revenue estimate, showing the CCA loss is a headline rather than a near-term revenue event.
- Valuation de-rated to lower-middle of history: At 19.57x trailing and 18.38x forward earnings, NOC trades in the lower-middle of its five-year 10x–38x PE band and well below the 27.69x recorded in Q1 2026. Price-to-book of 4.91x sits near the low end of its 3.7x–5.7x recent range, meaning the market has already stopped pricing optimistic B-21 execution.
- Consensus target implies 15.6% upside: The $636.00 average target across 24 analysts is 15.6% above the $550.30 price, with a 15 Buy / 10 Hold / 1 Sell split (recommendation mean 2.0). Baird's October 21 upgrade to Outperform from Neutral shows selective re-rating is already underway at the margin.
Bearish
- PEG of 7.41 flags growth-vs-multiple mismatch: A PEG ratio of 7.41 is the clearest valuation red flag in the dataset: the market is paying a steep multiple relative to the growth rate embedded in that calculation. For a mature defense prime growing revenue at 6.7%, an 18.4x forward PE leaves little room for execution disappointment.
- CCA hardware loss is a strategic setback: Northrop lost the Air Force's Collaborative Combat Aircraft hardware award, forcing it to self-fund the Talon Blue drone and pivot toward a software-centric autonomy role. The market's reaction — a -38.35% max drawdown from the $774 high — shows investors treat this as a franchise question, not a one-quarter event.
- Wide 90% analyst target dispersion: The $430 low to $815 high target range spans 90% of the low end, signaling genuine disagreement about B-21 margins, restricted-program charges, and CCA revenue impact. The $430 low target sits 21.9% below the current price, meaning the bear case is a credible anchor if program execution disappoints.
- Persistent relative underperformance: NOC is down 4.36% over one year and 6.04% YTD versus the S&P 500's +10.39% and +10.62%, a -14.75 percentage point one-year relative-strength gap. The stock sits at only 26.4% of its 52-week range, and the -1.29% three-month change shows the one-month rally is a fresh inflection, not an established trend.
NOC Technical Analysis
Northrop Grumman is in a choppy, range-bound consolidation rather than a clean trend: the stock is down 4.36% over the past year and 6.04% year-to-date, badly lagging the S&P 500's +10.39% and +10.62% respective returns. At $550.30, the shares sit at roughly 26.4% of the 52-week range of $470.06–$774.00 — closer to the lower quartile than the midpoint — which frames the stock as a laggard attempting to base rather than a momentum leader. The -38.35% max drawdown over the trailing period underscores how violent the de-rating has been from the highs near $774.
Short-term momentum, however, has turned sharply positive and is diverging from the longer-term downtrend. The stock has rallied 15.13% over the past month versus a -1.99% decline in SPY, producing a relative strength of +17.12 percentage points — a powerful mean-reversion thrust off the October lows near $473–$478. That one-month surge contrasts with a -1.29% three-month change and a -0.36% six-month change, signaling the move is a fresh inflection rather than a continuation; the 3-month relative strength of just +0.72 versus SPY confirms the outperformance is very recent. Volume of roughly 789k shares is modest for a mega-cap defense name, so confirmation of the rally would ideally come with heavier institutional participation.
Key technical levels are well defined: support rests at the 52-week low of $470.06, with the October consolidation zone of $473–$485 acting as the immediate floor, while resistance sits at the $774.00 52-week high — a distant 40.6% above the current price — with intermediate supply likely around the August highs of $585–$589. A breakout above $589 would validate the reversal and open a path toward the mid-$600s, whereas a breakdown below $470 would signal the October bounce failed and reassert the primary downtrend. The reported beta of -0.136 is statistically unusual for a defense prime and implies near-zero or inverse correlation to the market over the measurement window — a diversification characteristic that matters for portfolio construction, but one that also means the stock's risk is idiosyncratic (program awards, charges, budget headlines) rather than macro-driven, so position sizing should be governed by event risk rather than index beta.
Beta
-0.14
-0.14x market volatility
Max Drawdown
-38.4%
Largest decline past year
52-Week Range
$470-$774
Price range past year
Annual Return
-7.9%
Cumulative gain past year
| Period | NOC Return | S&P 500 |
|---|---|---|
| 1m | +8.7% | -5.9% |
| 3m | -8.1% | -5.2% |
| 6m | -4.4% | -0.6% |
| 1y | -7.9% | +8.2% |
| ytd | -10.3% | +7.5% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
NOC Fundamental Analysis
Revenue is growing at a healthy clip and, importantly, accelerating: Q3 2026 revenue of $11.122 billion rose 6.71% year-over-year versus $10.423 billion in Q3 2025, and the sequential cadence ($9.881B in Q1, $10.876B in Q2, $11.122B in Q3) shows steady build through the year. Segment mix is balanced across Aeronautics ($3.575B), Mission Systems ($3.155B), Space Systems ($2.749B), and Defense Systems ($2.307B), with Aeronautics and Space — the B-21 and Sentinel-heavy franchises — carrying the longest-duration growth optionality. The trajectory implies full-year revenue near the $56.5 billion consensus estimate, and the 6.7% growth rate is at the upper end of what a prime contractor of this size typically delivers, supporting the case that the CCA loss is a headline risk rather than a near-term revenue event.
Profitability is solid and margins are expanding meaningfully. Q3 2026 net income was $1.124 billion on a 21.15% gross margin and 11.41% operating margin, up from 10.10% operating margin in Q2 and a notably weak 6.05% in Q1 2025 — evidence that the prior year's charge-driven trough is behind the company. Net margin of 10.11% in Q3 compares favorably to the 8.86% posted in Q1 2026, and the 16.50% EBITDA margin ($1.835B on $11.122B) reflects the operating leverage inherent in fixed-price production programs as they mature. For aerospace and defense, high-single-digit to low-double-digit operating margins are competitive with peers, and the sequential improvement from 10.08% (Q2) to 11.41% (Q3) is the single most important fundamental datapoint in this dataset.
Balance sheet and cash generation are adequate but not fortress-like. Debt-to-equity stands at 1.18x with a current ratio of 1.09, and TTM free cash flow of $3.829 billion against an $81.8 billion market cap implies an FCF yield of roughly 4.7% — respectable for a defense prime and supportive of the 1.58% dividend yield at a conservative 30.9% payout ratio. Cash flow is highly seasonal and working-capital intensive: Q1 2026 operating cash flow was -$1.656 billion (FCF -$1.823 billion) before swinging to +$1.745 billion in Q3, a pattern typical of defense receivables timing. ROE of 25.08% is strong but flattered by leverage (equity multiplier near 2.8x), while ROA of 7.11% is more modest; the company funds capex ($306M in Q3) and dividends ($351M) comfortably from operations in normal quarters, so external financing dependence is low.
Quarterly Revenue
$11.1B
2026-09
Revenue YoY Growth
+6.7%
YoY Comparison
Gross Margin
21.1%
Latest Quarter
Free Cash Flow
$3.8B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is NOC Overvalued?
Because Northrop is solidly profitable (Q3 net income of $1.124 billion), the PE ratio is the appropriate primary metric. The stock trades at 19.57x trailing earnings but only 18.38x forward earnings — a modest 6% compression that implies the market expects low-teens EPS growth, consistent with the $37.87 consensus EPS estimate against roughly $33–34 of trailing earnings power. The PEG ratio of 7.41 is the outlier flag: it suggests the market is paying a steep multiple relative to the growth rate embedded in that calculation, which is the core valuation tension for a mature defense prime.
Relative to the aerospace and defense sector, the picture is mixed depending on the metric. The 19.57x trailing PE and 18.38x forward PE are roughly in line with — arguably slightly below — the sector's typical high-teens to low-20s range, while the 13.49x EV/EBITDA and 2.11x EV/Sales sit within normal prime-contractor bands. However, the 4.91x price-to-book and 1.95x price-to-sales look richer on a book and revenue basis, and the 17.20x price-to-cash-flow reflects the working-capital drag on reported cash flow. On balance, NOC does not screen as an obvious premium name on earnings; the discount to its own history (discussed below) is doing more work than any sector-relative cheapness.
Historical context is the most compelling part of the valuation case. The trailing PE of 19.57x compares with 27.69x in Q1 2026, 16.54x in Q2 2026, and a five-year sampling that has ranged from roughly 10x to 38x — placing the current multiple in the lower-middle of its own band. Similarly, price-to-sales of 1.95x is far below the 6.2x–9.8x readings recorded across 2025–2026 quarterly snapshots (a discrepancy that partly reflects differing share-count and revenue bases in the historical series), and price-to-book of 4.91x is near the low end of its 3.7x–5.7x recent range. The read-through: the market is no longer pricing optimistic B-21 execution, and at ~18x forward earnings with a 4.7% FCF yield, the risk/reward has shifted toward 'value with a catalyst' rather than 'momentum at any price.'
PE
19.6x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 10x~21x
vs. Industry Avg
39.4x
Industry PE ~39.4x*
EV/EBITDA
13.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on program concentration and cash-flow seasonality. Aeronautics ($3.575B) and Space Systems ($2.749B) together represent roughly 57% of Q3 revenue and carry the B-21 and Sentinel franchises, so a single restricted-program charge can swing earnings materially — Q1 2025's 6.05% operating margin versus Q3 2026's 11.41% shows the magnitude of that volatility. Debt-to-equity of 1.18x with a current ratio of 1.09 leaves modest cushion, and free cash flow is working-capital intensive: Q1 2026 FCF was -$1.823 billion before recovering to +$1.745 billion in Q3, meaning the 4.7% FCF yield is not evenly distributed across the year. ROE of 25.08% is flattered by leverage (equity multiplier near 2.8x) while ROA is a more modest 7.11%, so returns on capital are less impressive than the headline suggests.
Market and competitive risks are dominated by valuation sensitivity to program news rather than macro factors. The reported beta of -0.136 means the stock has near-zero or inverse correlation to the market, so its risk is idiosyncratic — program awards, charges, and budget headlines — and position sizing should be governed by event risk rather than index beta. The PEG ratio of 7.41 signals the market is paying a steep multiple relative to embedded growth, and the loss of the Air Force CCA hardware award to a competitor is a direct competitive setback that management is offsetting with the self-funded Talon Blue drone. The 90% wide analyst target range ($430–$815) quantifies how much disagreement exists about B-21 margin outcomes, and Barclays maintaining Underweight while Bernstein and JPMorgan stay Neutral shows the re-rating is selective rather than broad-based.
In a worst-case scenario, a fresh restricted-program charge on the B-21 or Sentinel combined with continued CCA-related revenue disappointment would compress margins back toward the Q1 2025 trough and push the stock toward the $430 analyst low target — a decline of roughly 21.9% from the current $550.30. A deeper selloff to the 52-week low of $470.06 would represent a loss of about 14.6%, and the trailing max drawdown of -38.35% from the $774 high shows how violent the de-rating can be when program confidence breaks. The realistic downside band is therefore -15% to -22% in an adverse scenario, with the $430 low target as the credible floor if execution disappoints and the one-month 15.13% rally fully reverses.
FAQ
The most severe risk is program-specific: a new restricted charge on B-21 or Sentinel could swing operating margin from the current 11.41% back toward the 6.05% Q1 2025 trough, and the 90% wide $430–$815 analyst target range shows how much disagreement exists on this point. Second is competitive/franchise risk — Northrop lost the Air Force CCA hardware award and is now self-funding the Talon Blue drone, a strategic setback reflected in the -38.35% max drawdown from the $774 high. Third is financial: debt-to-equity of 1.18x with a current ratio of just 1.09 leaves limited cushion, and free cash flow is highly seasonal (Q1 2026 FCF of -$1.823 billion before +$1.745 billion in Q3), so the 4.7% FCF yield is not evenly distributed. Fourth is valuation/momentum risk: a PEG of 7.41 and a -14.75 percentage point one-year relative-strength gap versus the S&P 500 mean the recent 15.13% one-month rally could reverse if execution disappoints.
The 12-month forecast splits into three scenarios. The base case (55% probability) targets $600–$660, assuming Northrop hits the $56.5 billion revenue and $37.87 EPS consensus, holds operating margin in the 10–11.5% band, and the multiple stays near 18x forward — converging on the $636 average analyst target. The bull case (20% probability) targets $700–$815, requiring B-21 production-margin disclosure, contained charges, and conversion of Talon Blue and autonomy work into a credible franchise, with EPS toward the $38.51 high estimate. The bear case (25% probability) targets $430–$470, driven by a fresh program charge, margin compression below 9%, and a retest of the $470.06 52-week low. The base case is most likely, and its key assumption is that no new restricted-program charges emerge — that single variable determines whether the margin recovery proves durable.
The answer depends on the metric, but on earnings NOC looks fairly valued to modestly undervalued relative to its own history. At 19.57x trailing and 18.38x forward earnings, the stock sits in the lower-middle of a five-year 10x–38x PE band and well below the 27.69x recorded in Q1 2026, while price-to-book of 4.91x is near the low end of its recent 3.7x–5.7x range. Against defense peers, the 13.49x EV/EBITDA and 2.11x EV/Sales are within normal prime-contractor bands, so there is no obvious sector-relative premium. The red flag is the PEG ratio of 7.41, which signals the market is paying a steep multiple relative to embedded growth for a company expanding revenue at 6.7%. Net-net, the market appears to have stopped pricing optimistic B-21 execution — the valuation implies low-teens EPS growth toward the $37.87 consensus estimate, not a re-rating story.
From a risk/reward standpoint, NOC offers a moderately attractive setup: at $550.30 it trades 15.6% below the $636 average analyst target, with 15 of 24 analysts at Buy and a recommendation mean of 2.0. The upside case is anchored in a genuine margin inflection — operating margin rose from 10.08% in Q2 2026 to 11.41% in Q3, and net margin from 8.86% in Q1 to 10.11% in Q3 — while the 18.38x forward PE sits in the lower-middle of its historical band. The biggest downside risk is a fresh restricted-program charge that would compress margins toward the 6.05% Q1 2025 trough and pull the stock toward the $430 low target, roughly -22%. It is a reasonable buy for patient investors with a 12–18 month horizon who can tolerate program-event volatility and size positions accordingly; it is less suitable for momentum traders, given the stock is still down 4.36% over one year and sits at only 26.4% of its 52-week range.
NOC is better suited to a long-term holding period of at least 12–18 months than to short-term trading. It is a mature, profitable defense prime with $11.122 billion in quarterly revenue, a 1.58% dividend at a conservative 30.9% payout, and long-cycle backlog programs like the B-21 and Sentinel that give earnings visibility well beyond a single quarter. The reported beta of -0.136 means near-zero or inverse market correlation, so returns are driven by idiosyncratic program events rather than macro swings — a profile that rewards patience and punishes reactive trading. Short-term traders face a choppy tape: the stock is down 6.04% YTD and 4.36% over one year, with a -38.35% max drawdown, even as it rallied 15.13% in the past month. A reasonable minimum holding period is four to six quarters, long enough to capture at least one full B-21 production-lot disclosure and a normalized cash-flow cycle.