Northrop Grumman beats on profit, misses on revenue by $20 million and raises its outlook

Northrop Grumman $NOC raised its 2026 earnings guidance on Tuesday after reporting third-quarter net earnings of $1.12 billion, or $7.89 per diluted share.

The company raised its full-year outlook for MTM-adjusted earnings per share, which excludes pension mark-to-market gains and losses, to a range of $29.35 to $29.75. The prior range was $28.60 to $29.10. Northrop Grumman also lifted its segment operating income forecast to $4.94 billion to $5.04 billion from $4.85 billion to $5 billion. It expects sales of $43.75 billion to $44.25 billion and adjusted free cash flow of $3.1 billion to $3.5 billion.

Net earnings compared with $1.1 billion, equal to $7.67 per share, a year earlier. Sales rose 7% to $11.12 billion from $10.42 billion.

Analysts polled by FactSet had expected earnings of $7.18 per share and revenue of $11.14 billion, according to The Wall Street Journal. Quarterly sales came in slightly below that revenue estimate.

Sales rose at all four sectors. Aeronautics Systems sales increased 14% to $3.58 billion, driven by F-35 production and sustainment, higher B-21 sales and more B-2 sustainment work. Defense Systems sales rose 12% to $2.31 billion, including a $180 million increase on the Sentinel program. Mission Systems and Space Systems sales each rose 2%.

The operating margin rate fell to 11.4% from 11.9%, which the company attributed mainly to a lower FAS/CAS operating adjustment. The segment operating margin rate declined to 12.1% from 12.3%, largely because of a $68 million favorable contract adjustment at Mission Systems in the prior-year quarter. The effective tax rate dropped to 13.4% from 16.9% on higher research credits.

Adjusted free cash flow rose 44% to $1.81 billion. That figure includes $371 million in proceeds from the sale of equipment to a customer.

Net awards totaled $16.4 billion in the quarter, a book-to-bill ratio of 1.5 times. Backlog reached $109.6 billion, up from $95.7 billion at the end of 2025. Awards included $4.6 billion for restricted programs, $2 billion for Sentinel, $1.4 billion for Virginia Class submarines, $1.3 billion for the F-35 and $1 billion for the E-2.

"I'm confident our new record backlog, well-positioned portfolio and investments, and industry-leading performance will continue to drive sales and earnings growth as reflected in our 2027 outlook," Chair, CEO and President Kathy Warden said in a statement.

Northrop Grumman will webcast its earnings conference call at 9:30 a.m. ET on Tuesday.