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Northrop Grumman is one of the largest defense and technology companies globally, with a primary focus on aerospace and space technology. With over 100,000 employees, the company’s headquarters are located in Falls Church, Virginia.
The company is divided into four business segments: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems. Space Systems accounts for 35% of the revenue, followed by Mission Systems at 28%, Aeronautics Systems at over 27%, and Defense Systems at 10%.
Geographically, the net revenue is distributed as follows: 87.5% in the USA, 6.2% in Europe, and 4% in Asia/the Pacific region.
For the second quarter, the company reported revenues of $10.22 billion, exceeding expectations, with an operating margin of 10.7%. Additionally, the adjusted earnings per share were $6.36, surpassing the consensus estimate of $5.93.
The strong revenue and margins in Aeronautics and Defense Systems were significant contributors to the positive results. The company also raised its full-year sales forecast to between $41-41.4 billion and earnings per share to between $24.90-25.30. The order backlog stands at $83 billion, and the company announced a $2.5 billion share repurchase.
Historical Data and Future Projections
| 2023 | 2024 | 2025 | 2026 | |
| Revenue MUSD | 39,290 | 41,340 | 42,923 | 44,891 |
| Ebit MUSD | 3,992 | 4,329 | 4,664 | 4,852 |
| Profit before tax MUSD | 2,346 | 4,498 | 4,804 | 4,990 |
| Net profit MUSD | 2,056 | 3,715 | 3,979 | 4,132 |
| Operating margin, % | 10.16% | 10.47% | 10.87% | 10.81% |
| Earnings per share USD | 13.53 | 25.18 | 27.58 | 29.19 |
| Dividend USD | – | 7.956 | 8.619 | 9.329 |
| P/E | 34.6x | 20.2x | 18.5x | 17.4x |
| Source: S&P Global Markets Intelligence | ||||
Northrop Grumman’s roots trace back to Grumman Aircraft Engineering Corporation, founded in 1930 by Leroy Grumman, initially a key supplier of seaplanes and military aircraft to the US Navy. The company played a crucial role in the US space program, building the lunar module that landed astronauts on the moon during the Apollo program.
Northrop, founded in 1939 by aircraft designer Jack Northrop, was a pioneer in aircraft design, developing advanced stealth aircraft like the Northrop B-2 Spirit. During WWII and the Cold War, Northrop Corporation produced military aircraft like the F-89 Scorpion and F-5 Freedom Fighter.
The merger of Northrop and Grumman in 1994 formed the powerhouse we know today. The company continues to be at the forefront of defense and space technology, collaborating with NASA on projects like the James Webb Space Telescope and next-generation combat aircraft and drones.
Northrop Grumman is a critical supplier to the US defense, particularly in the nuclear triad, responsible for the B-21 bomber and Sentinel intercontinental ballistic missile. These multi-decade programs ensure stable revenue and insight into the company’s long-term earnings potential.
The Sentinel program aims to develop a new generation of intercontinental ballistic missiles to replace aging Minuteman III missiles in the US nuclear arsenal. The program is part of the US strategic nuclear modernization known as the Ground Based Strategic Deterrent.
While the Sentinel program and the new B-21 Raider bomber are still in development, they are expected to enhance US defense capabilities in the coming years. The strategic submarines equipped with ballistic nuclear missiles are manufactured by General Dynamics.
Year-to-date, the stock has risen by 9%, with a 40% increase over the past three years. The company offers a 1.5% dividend yield, paid quarterly. Out of 23 analysts covering the stock, nine are positive, with an average price target of $520.
Looking ahead to 2025, the company is trading at a P/E ratio of 18 and an EV/EBIT ratio of 18, indicating favorable valuation metrics.
Northrop Grumman’s operations are crucial for various aspects of US defense, making it a key player in the country’s security and technological advancements.
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