Northrop Grumman Q2 miss misses earnings beat n arrival

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Northrop Grumman (NOC) posted second-quarter earnings that missed analysts' estimates on the top line, with revenue falling short of expectations even as the defense contractor lifted its full-year sales forecast.

The Falls Church, Virginia-based company reported adjusted earnings of $6.12 a share for the quarter ended June 30, beating the consensus estimate of $5.98, according to data compiled by Bloomberg. Revenue came in at $10.9 billion, below the $11.1 billion analysts had penciled in. Sales in its aeronautics systems unit, which builds the B-21 bomber and F-35 fuselage, declined 4% from a year earlier to $3.3 billion, reflecting lower volumes on classified programs.

“Our second-quarter performance was solid, with strong execution across the portfolio,” Chief Executive Kathy Warden said on the call. She pointed to “sustained demand” for the company’s products as global defense spending remains elevated.

Northrop raised its full-year sales guidance to a range of $44.5 billion to $45 billion, from an earlier forecast of $44 billion to $44.5 billion. The company also lifted its earnings per share outlook to $24.50 to $25.00, from $24.15 to $24.65. Operating cash flow guidance was maintained at $4.5 billion to $5 billion.

The aerospace and defense sector has been a steady performer amid geopolitical tensions, with the U.S. defense budget rising for a fifth consecutive year in 2026. Northrop’s backlog stood at $86 billion at quarter-end, up from $84 billion three months earlier.

Shares of Northrop Grumman are down about 8% this year, trailing the S&P 500’s 12% gain. The stock moved little in early trading Friday. The company’s Alpha Score from AlphaScala is 36 out of 100, a Mixed rating, reflecting recent mixed momentum signals across insider activity and valuation measures. You can track the full profile on the NOC stock page.

One area of investor focus has been the company’s free cash flow trajectory. Northrop generated $1.2 billion in free cash flow in the quarter, up from $1.1 billion a year ago. Warden said the company expects to improve cash conversion in the second half of the year as working capital normalizes.

On the call, analysts pressed on margin trends in the space systems division, where operating margin slipped to 9.8% from 10.2% a year ago, partly because of higher research-and-development spending on classified programs. Chief Financial Officer John Greene told analysts the company expected margins in that division to improve in the back half of the year as volumes ramp.

The company also reiterated its commitment to share buybacks, having repurchased $1.4 billion of stock during the first half of 2026. The remaining authorization at quarter-end was $3.6 billion.

Northrop’s pension tailwind has been a source of earnings support. The company’s net pension income was $89 million in the quarter, compared with $76 million a year ago. Greene said the company expected pension income to be roughly flat for the full year.

The quarter included a $117 million charge related to a contract reserve adjustment on a classified space program, which the company said was driven by revised cost estimates. That charge reduced operating income by roughly $0.45 per share.

Warden said the company expected the U.S. Department of Defense’s fiscal 2027 budget request, due early next year, to remain supportive of Northrop’s core programs, including the B-21, Sentinel intercontinental ballistic missile replacement, and the F-35.

“We remain confident in the growth trajectory of our programs and our ability to generate improving cash returns for shareholders,” she said.

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