Northrop Grumman builds the B-21 stealth bomber, the Sentinel nuclear missile, satellites and rocket motors. Its backlog is a record $110 billion and its growth rests on two of the biggest programs in the defense budget. Anduril, valued privately at about $90 billion, is now worth more than Northrop’s entire stock market value.
Today’s close against the report’s numbers, updated every weekday. The analysis is as of October 22, 2026; the rating as of October 22, 2026. Both change only when the report is revised.
The cash-flow model’s bear-to-bull range, the probability-weighted value, the price and its 52-week range. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 22, 2026, after its third-quarter results. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds no NOC shares directly.
Northrop has four segments. Aeronautics builds the B-21 Raider stealth bomber and parts of the F-35. Defense Systems holds Sentinel, the new intercontinental ballistic missile, along with munitions and missile components. Mission Systems makes radars, sensors and electronic warfare systems. Space builds satellites and is one of the largest makers of solid rocket motors.
About 84% of sales go to the U.S. government. More than any other prime, Northrop’s growth depends on two programs: the B-21 and Sentinel, both strategic nuclear systems with decades of work ahead.
Third-quarter sales rose 7% to $11.1 billion, led by Aeronautics (+14%) and Defense Systems (+12%). Backlog reached a record $109.6 billion on $16.4 billion of new awards. Northrop kept 2026 sales guidance at $43.75–44.25 billion, raised segment operating income to $4.94–5.04 billion and adjusted earnings to $29.35–29.75 a share, and kept adjusted free cash flow at $3.1–3.5 billion.
For 2027 it expects sales growth of 5–7% with all four segments growing, margins up 10–20 basis points and free cash flow of $3.3–3.7 billion, with faster growth in 2028. The B-21 is meeting its test requirements, and the Air Force approved Sentinel’s design maturity, allowing a first flight in 2027.
At about $90 billion in its October employee share sale, Anduril is valued above Northrop’s market value of about $79 billion, on roughly a tenth of the revenue. That says more about how investors value growth than about who builds what, but the two do now compete. Northrop’s own drone fighter, the Talon Blue, flew fully autonomously this quarter, yet the Air Force picked Anduril and General Atomics, not Northrop, to build the first drone wingmen in June. Anduril also makes solid rocket motors, a business where Northrop is one of the two largest suppliers and only resumed deliveries this quarter.
| Market | Where Northrop stands | How exposed |
|---|---|---|
| Drone wingmen (CCA) | Talon Blue not selected for Increment 1; preparing for Increment 2; in the software pool | High |
| Solid rocket motors | About $1 billion of work; deliveries resumed in Q3 after delays | Medium: Anduril and other new suppliers are adding capacity |
| B-21 and Sentinel | Sole contractor on both, with production through the 2030s | Low: no new entrant can build a stealth bomber or ICBM |
| Space and sensors | Large incumbent in satellites and radars | Medium over time, as cheaper satellite makers grow |
Northrop is more exposed than Lockheed to the shift toward cheap autonomous systems, because its newer bets (Talon Blue, rocket motors) sit exactly where the new entrants are strongest. Its core (the B-21 and Sentinel) is about as protected as anything in defense, but it is also the part most exposed to budget politics.
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM Sep 2026 | |
|---|---|---|---|---|---|---|
| Revenue | $35.7B | $36.6B | $39.3B | $41.0B | $42.0B | $43.6B |
| Operating margin | 15.8% | 9.8% | 6.5% | 10.6% | 10.8% | 10.6% |
| Net income | $7.0B | $4.9B | $2.1B | $4.2B | $4.2B | $4.5B |
| Operating cash flow | $3.6B | $2.9B | $3.9B | $4.4B | $4.8B | $5.3B |
| Capital spending | $1.4B | $1.4B | $1.8B | $1.8B | $1.4B | $1.4B |
| Free cash flow | $2.2B | $1.5B | $2.1B | $2.6B | $3.3B | $3.8B |
Operating income dropped in 2023 because of a $1.56 billion charge on the B-21’s fixed-price early production lots, which Northrop is still working through (about $70–100 million of losses a quarter). 2021 figures include a gain on the sale of its IT services business. The quarterly view shows each quarter.
At the end of September Northrop had $3.7 billion of cash and $15.2 billion of debt, about $11.5 billion of net debt. It is spending heavily on new factories for the B-21, Sentinel and munitions: capital spending of about $2.1 billion in 2027, or 4.5% of sales, well above Lockheed’s. That keeps free cash flow at about 8% of sales, which limits buybacks. Management says “everything is on the table” for its microelectronics and quantum businesses, including a separation.
| Assumption | Base case | Basis |
|---|---|---|
| Sales, 2026 | $44.0B | Guidance midpoint |
| Growth, 2027 and 2028 | 6%, then 7% | Guided 5–7% for 2027, higher for 2028; fades to 3% by year 10 |
| Operating margin | 11.3% rising to 12% | 10–20 basis points a year, as guided |
| Reinvestment | $1 for every $3 of new sales | Heavy capital spending on new programs |
| Discount rate | 8.0% | Beta 0.80 for defense peers (Northrop’s own is 0.50), 16% debt |
| Terminal growth | 3.0% | With a 15% return on new capital |
| Bear | Base | Bull | |
|---|---|---|---|
| Growth, 2027 / 2028 | 3% / 3% | 6% / 7% | 8% / 9% |
| Long-run operating margin | 10.5% | 12% | 13% |
| Discount rate | 9.0% | 8.0% | 7.0% |
| Value per share | $329 | $564 | $870 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $582. The bear case is a budget cut that slows the B-21 and Sentinel plus losses on fixed-price production; the bull case is faster B-21 production and a munitions ramp in 2027–2028.
| Discount rate | 7.0% | 7.5% | 8.0% | 8.5% | 9.0% |
|---|---|---|---|---|---|
| Value per share | $720 | $632 | $561 | $503 | $455 |
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To justify the price, you need | Against |
|---|---|
| Sales growth of about 6.4% a year for two years | 6% and 7% |
| Or a long-run operating margin of about 11.8% | 12% |
The price is close to our base case: investors are paying for roughly the growth management is guiding to, no more. Before its results the stock was 34% below its high and down 9% for the year, the worst of the primes, because the B-21 and Sentinel are the programs a Democratic Congress is most likely to slow.
| Risk | Why it matters |
|---|---|
| Budgets and politics | The B-21 and Sentinel are the most exposed programs if Congress trims the increase. |
| Fixed-price B-21 lots | The early production lots are loss-making; more charges are possible. |
| New entrants | Anduril and others are taking drones and adding rocket-motor capacity. |
| Sentinel cost | The program’s cost growth has drawn scrutiny; production is not yet priced. |
| Cash flow | Heavy capital spending keeps free cash flow near 8% of sales. |
Upside: faster B-21 production, a munitions and rocket-motor ramp from 2027, Golden Dome space work, and a separation of the microelectronics business.
Northrop owns the B-21 and Sentinel, which no new entrant can build. Its newer bets sit where Anduril is strongest, and its growth depends on budgets the midterms put in question.
What would change the value: The defense budget after the midterms, more B-21 charges, and whether Talon Blue wins in the next drone competition would move the value.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $582. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades within 10% of our estimated value.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating is the same whether the index is assumed to grow 6% or 10% a year. How ratings work
| Measure | Northrop Grumman | Industry median | Rank | |
|---|---|---|---|---|
| Revenue growth, last fiscal year | 2.2% | 10.1% | 12 of 12 | Worse than the median |
| Operating margin | 10.6% | 10.3% | 6 of 12 | Better than the median |
| Price to earnings | 17.7× | 27.7× | 2 of 12 | Better than the median |
| Free cash flow yield | 4.8% | 3.0% | 5 of 12 | Better than the median |
Peers: the 11 other S&P 500 companies in Aerospace & Defense with complete data (AXON, BA, GD, GE, HII, HWM, LHX, LMT, RTX, TDG, TXT). Last twelve months where reported, from SEC filings; prices from the latest close. A lower price-to-earnings ratio ranks higher. These figures update with each data run; the rating does not.
Northrop’s core is safe from Anduril; its budget is not safe from Congress.
| What | Figures | Source |
|---|---|---|
| Latest results | $11.1B (Sales, Q3 2026, +7%), $7.89 (Earnings per share), $1.81B (Adjusted free cash flow), $109.6B (Backlog, a record) and others | Q3 2026 results; Earnings call; Backlog analysis |
| The numbers (five-year table) | Five years of annual figures and the last twelve months | SEC XBRL company facts; latest: 10-K for the period to 2025-12-31, 10-Q for the period to 2026-09-30 |
| Price at writing | $552.53 (Close, Oct 22, 2026) | Yahoo Finance; the time of the quote is stated beside the price |
| Discount rate inputs | 10-year Treasury 5.15%, equity risk premium 4.5% | Fixed for every report so they can be compared; How ratings work |
| Valuation | Every value, case and sensitivity | This site’s model: XLSX, CSV |
| Checked by hand | Not yet | Reports are added to the audit log as they are revised |
| Input | Bear (10th percentile) | Base (median) | Bull (90th percentile) |
|---|---|---|---|
| Growth, first forecast year | 3.0% | 6.0% | 8.0% |
| Growth, second forecast year | 3.0% | 7.0% | 9.0% |
| Operating margin, near term | 10.5% | 11.3% | 11.8% |
| Operating margin, long run | 10.5% | 12.0% | 13.0% |
| Discount rate | 9.0% | 8.0% | 7.0% |
| Simulation result | |
|---|---|
| Expected value (average of 4,000 runs) | $564.43 |
| Likely range, 10th to 90th percentile | $391.74 to $752.25 |
| Median | $549.28 |
| Chance the value is above the price | 49% |
| Chance it is cheaper than the S&P 500 | 92% |
Each input is drawn from a split normal: its bear and bull values are the 10th and 90th percentiles, so the two sides can differ. Business inputs share a common factor (correlation 0.6); the discount rate moves on its own. Inputs not listed are held at their base value. How the simulation works.