Beat
Backlog reached $104.7B with book-to-bill of 1.84. EPS of $7.68 beat roughly $6.82 consensus, but the upside was entirely tax-driven. A $91M GEM charge and $68M SiAW charge held segment margin to 10.6% versus about 11.2% expected.
[AS-056]Northrop Grumman
Q2 2026: Record awards and backlog supported the demand thesis, but program charges and a tax-driven EPS raise left underlying margin progress limited.
ResultBeatGuidanceRaisedEnvironmentimproving
Investment snapshot
What happened and why it mattered
Raised
2026 EPS increased $1.20 to $28.60–29.10, with roughly 60% of the raise tax-driven; segment operating income remained $4.85–5.0B and book-to-bill at least 1.25.
[AS-056]Acceleration
Demand visibility improved sharply, while underlying operating guidance stayed flat and margin conversion remained the key execution test.
[AS-056]-2.2%
The initial decline reflected low-quality EPS upside and fresh charges; the shares recovered as investors focused on backlog.
[MKT-001]Results versus expectations
The print and the three most important read-throughs
Backlog reached $104.7B with book-to-bill of 1.84. EPS of $7.68 beat roughly $6.82 consensus, but the upside was entirely tax-driven. A $91M GEM charge and $68M SiAW charge held segment margin to 10.6% versus about 11.2% expected.
- 1
Backlog reached $104.7B with book-to-bill of 1.84.
- 2
EPS of $7.68 beat roughly $6.82 consensus, but the upside was entirely tax-driven.
- 3
A $91M GEM charge and $68M SiAW charge held segment margin to 10.6% versus about 11.2% expected.
Guidance bridge
GuidanceRaisedLatest outlook and KPI implications
2026 EPS increased $1.20 to $28.60–29.10, with roughly 60% of the raise tax-driven; segment operating income remained $4.85–5.0B and book-to-bill at least 1.25.
| Metric | Prior | Latest | Consensus | Delta | Status | Reason / implication |
|---|---|---|---|---|---|---|
| 2026 EPS | $27.40–27.90 | $28.60–29.10 | Not consistently available | +$1.20 | Raised | Tax and operationsApproximately 60% tax-driven |
| 2026 segment operating income | $4.85–5.0B | $4.85–5.0B | Not consistently available | No change | Reiterated | Program charges offset volumeNo operating raise |
| 2026 sales | $43.5–44.0B | Reiterated | Not consistently available | No change | Reiterated | ProductionBacklog supports range |
| 2026 free cash flow | $3.1–3.5B | Reiterated | Not consistently available | No change | Reiterated | Cash timingStill investment-heavy |
| Book-to-bill | At least 1.0 | At least 1.25 | Not consistently available | Raised | Raised | Award environmentBacklog continues to expand |
Management signal — paraphrased
The direct read-through was to book-to-bill, backlog, Defense Systems and Space growth, segment margin and the conversion of funded awards into cash.
Implied cadence
Demand visibility improved sharply, while underlying operating guidance stayed flat and margin conversion remained the key execution test.
Stock reaction
Why the shares moved
The initial decline reflected low-quality EPS upside and fresh charges; the shares recovered as investors focused on backlog.
- Record backlog
- Tax-driven EPS raise
- GEM and SiAW charges
Did the reaction persist?
[MKT-001]The stock fell about 2.2% initially and recovered within five sessions.
Adjusted-close reaction
Independently calculated adjusted-close returns
| Window | Stock | vs benchmark | vs peers |
|---|---|---|---|
| 1D | -2.2% | -3.1% | -1.6% |
| 2D | +0.3% | -0.5% | -0.6% |
| 5D | +4.5% | +4.9% | -4.9% |
Market environment delta
EnvironmentimprovingWhat management said about the operating backdrop
Pipeline evidence converted into named international orders, missile frameworks and funded space actions, while execution remained the limiting variable.
- International / FMS demand (IBCS, Triton)Improving
Q2 2026: Kuwait authorized for 6 IBCS systems in May; UAE and Qatar LORs; NATO pledged $50bn including a Triton commitment
OutlookFMS approvals running "well ahead of prior years"; path to double international sales to $10bn by 2031KPI implicationDefense Systems sales; international mix (14% of sales)DISCLOSED FACT · High / confidence · [208] [209] [210] - Golden Dome / national security spaceImproving
Q2 2026: funds now being put on contract; natsec space backlog >$16bn, >$7bn sales, >15% of company
OutlookSelection decisions and contract actions expected through 2H26 into early 2027; HSD% space growthKPI implicationSpace Systems sales; company organic growthDISCLOSED FACT · High / confidence · [213] - B-21 production cadence & program of recordImproving
Q2 2026: framework finalized; USAF may expand PoR beyond 100; no net Q2 B-21 EAC, profitability improving
OutlookUSAF decision on PoR expansion expected by year-end; capex ~4.5% of sales in 2027/2028KPI implicationAeronautics sales (~$14bn guide); capex; FCFMANAGEMENT INTERPRETATION · High / confidence · [214] [215] [216]
- Tactical missiles / SRM supply & second-sourcingImproving
Q2 2026: PAC-3 SRM qualification completed; $2bn framework with DoW/LMT; ten multi-year agreements up to $10bn/7yrs
OutlookProduction capacity already in place ahead of definitized contracts; awards expected as FY27 appropriations flowKPI implicationDS sales growth; segment margin (accretive "mature" economics)MANAGEMENT INTERPRETATION · High / confidence · [211] [212] - Supply watchpointMonitor
The direct read-through was to book-to-bill, backlog, Defense Systems and Space growth, segment margin and the conversion of funded awards into cash.
OutlookConversion of framework ceilings and international requests into funded backlog, revenue and clean segment margin.KPI implicationThe direct read-through was to book-to-bill, backlog, Defense Systems and Space growth, segment margin and the conversion of funded awards into cash.Synthesis watchpoint · High confidence · AS-ME-056
- Contract mix / pricing (fixed-price shift)Deteriorating (risk)
Q2 2026: contract mix shifted to Fixed-Price +5pts to 52% vs Cost-Plus 48%
OutlookFramework agreements flip more margin/capital risk to contractor with upside if executedKPI implicationSegment margin risk profileBROKER/PEER EVIDENCE · Medium / confidence · [224] - Competition / new SRM entrants & F/A-XXMixed
Q2 2026: F/A-XX downselect expected as early as August; new SRM entrants (Avio, X-Bow, Ursa Major) scaling
OutlookFY27 NDAA mandates 40% PAC-3 second-sourcing, positive for NOC as alternate supplierKPI implicationAS upside optionality; DS SRM shareBROKER/PEER EVIDENCE · Medium / confidence · [225] [226]
Evidence and confidence
Source map
Consensus snapshots are reconstructed from contemporaneous broker notes; the flattened AlphaSense export does not preserve stable document URLs.
AlphaSense synthesis
Open source ↗Official company source
Open source ↗AlphaSense market-environment synthesis
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