The raised guidance and record backlog are bullish for the second-half ramp, but the Q2 EPS miss and margin compression at Defense Systems and Space Systems warrant caution. Monitor the Q3 earnings call for updates on Sentinel, SiAW, and GEM 63XL program execution, as well as the trajectory of segment margins. The stock may trade on the guidance raise vs the EPS miss, with the net effect likely mixed in the near term.
Price Chart
Executive Summary
Northrop Grumman reported Q2 2026 sales of $10.9B (+5% YoY), slightly above consensus, but GAAP EPS of $7.68 missed the $6.84 consensus estimate by 12.3%. The EPS miss was driven by lower segment operating income at Defense Systems and Space Systems, partially offset by a lower tax rate. The company raised its full-year 2026 sales guidance by $250M and MTM-adjusted EPS guidance by $1.20, signaling confidence in the second-half ramp. Record backlog of $104.7B (+9% YTD) and $20B in net awards underscore strong demand, but margin compression at Defense Systems (7.5% vs 12.7%) and Space Systems (8.6% vs 10.6%) raises execution concerns.
Key Financial Metrics
Key Facts
- Q2 2026 sales of $10.9B, +5% YoY, slightly above $10.81B consensus
- GAAP diluted EPS of $7.68, -6% YoY, missed $6.84 consensus by 12.3%
- Record backlog of $104.7B, +9% from Dec 2025, with $20B in net awards
- Raised FY2026 sales guidance to $43.75B-$44.25B (from $43.5B-$44.0B)
- Raised FY2026 MTM-adjusted EPS guidance to $28.60-$29.10 (from $27.40-$27.90)
- Segment operating margin rate fell to 10.6% from 11.8% YoY, driven by Defense Systems (7.5% vs 12.7%) and Space Systems (8.6% vs 10.6%)
- Defense Systems operating income -38% YoY on lower EAC adjustments, including $68M unfavorable on SiAW
- Space Systems operating income -16% YoY on $91M unfavorable GEM 63XL adjustment
- Adjusted free cash flow of $978M, +54% YoY, driven by lower tax payments
Financial Impact
Q2 GAAP EPS of $7.68 missed consensus by $0.84 (12.3%), but raised guidance adds ~$0.70-$1.20 to FY EPS midpoint
Risk Factors
- Execution risk on Sentinel and SiAW programs after unfavorable EAC adjustments
- Further margin compression at Defense Systems and Space Systems if cost overruns persist
- Dependence on U.S. government funding and potential budget disruptions
- GEM 63XL launch anomaly and cost increases could lead to additional charges
Market Snapshot
Investment Themes
Documents Analyzed
This report is based on 5 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| 8-K Filing (Primary) | 0001133421-26-000033 |
| Document: noc-20260721.htm | 0001133421-26-000033 |
| Document: 0001133421-26-000033-index-headers.html | 0001133421-26-000033 |
| Document: 0001133421-26-000033-index.html | 0001133421-26-000033 |
| 8-K Data (Synthetic) | 0001133421-26-000033 |
Track record builds as more directional reports settle.
Filters
| Type | Now | ||||
|---|---|---|---|---|---|
Aug 21, 2026 5w ago | 8-K | $549.28 $509.86 | ▼ −7.18% | ▼ −8.49% | $480.57 (−12.51%) |
Jul 21, 2026 10w ago | Press Release | $512.29 $589.14 | ▲ +15.00% | ▲ +12.44% | $480.57 (−6.19%) |
Jul 21, 2026 10w ago | 8-K | $512.29 $589.14 | ▲ +15.00% | ▲ +12.44% | $480.57 (−6.19%) |
Jun 18, 2026 15w ago | Press Release | $521.50 $518.65 | ▼ −0.55% | ▼ −1.08% | $480.57 (−7.85%) |
Apr 21, 2026 23w ago | S-3ASR | $589.05 $556.34 | ▼ −5.55% | ▼ −8.72% | $480.57 (−18.42%) |
Apr 21, 2026 23w ago | Press Release | $611.06 $550.00 | ▼ −9.99% | ▼ −14.91% | $480.57 (−21.35%) |
Apr 21, 2026 23w ago | 8-K | $611.06 $550.00 | ▼ −9.99% | ▼ −14.91% | $480.57 (−21.35%) |
Mar 19, 2026 28w ago | Press Release | $711.07 $664.52 | ▼ −6.55% | ▼ −14.17% | $480.57 (−32.42%) |
Feb 27, 2026 31w ago | Insider Cluster | $724.42 $676.67 | ▼ −6.59% | ▲ +0.96% | $480.57 (−33.66%) |
US Market Status
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