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Northrop Grumman shares rose about 7% after a Q3 2026 profit beat, a raised EPS outlook of $29.35-$29.75 and a record $110 billion backlog. B-21 drove growth.
- Q3 adjusted EPS of $7.89 beat the roughly $7.18 consensus on sales of $11.1 billion, up 7%.
- 2026 MTM-adjusted EPS guidance rose to $29.35-$29.75 from $28.60-$29.10.
- Backlog hit a record $109.6 billion on a 1.5x book-to-bill ratio and $16.4 billion in net awards.
Lead
Northrop Grumman (NYSE: NOC) shares climbed between 6% and 7% on Tuesday, October 20, 2026, after the defense contractor beat third-quarter profit estimates, raised its full-year earnings outlook and reported a record backlog. The stock traded near $541 in premarket action, up from a prior close of $510.65. Quarterly diluted earnings per share were $7.89 on sales of $11.1 billion, with net earnings of $1.1 billion.What Did Northrop Grumman Report for Q3 2026?
Northrop Grumman reported sales up 7% year over year to $11.1 billion, an operating margin of 11.4% and a segment operating margin of 12.1%. Segment operating income was $1.3 billion, up 5%.
Operating cash flow rose 12% to $1.7 billion. Adjusted free cash flow jumped 44% to $1.8 billion, helped by working-capital improvement and $371 million of proceeds from the sale of a B-21 test asset to the customer.
Growth was uneven across the four segments:
- Aeronautics Systems sales rose 14% to $3.6 billion, driven by higher B-21 volume and B-2 sustainment.
- Defense Systems sales rose 12% to $2.3 billion.
- Mission Systems sales rose 2% to $3.2 billion.
- Space Systems sales rose 2% to $2.7 billion.
Chief Executive Kathy Warden said customers "continue to turn to Northrop Grumman" and that the company is "delivering with urgency and innovation."
Why Did Northrop Grumman Shares Jump?
Shares jumped because the quarter combined an earnings beat of about 10% with higher guidance and stronger cash generation. Revenue landed roughly in line with expectations, so the profit surprise, the cash flow and the forward visibility drove the move.
The company booked $16.4 billion in net awards, a 1.5x book-to-bill ratio. That means it won about one and a half dollars of new work for every dollar of sales recognized. Backlog, the contracted work not yet converted to revenue, reached $109.6 billion, up 15% from a year earlier.
Capital returns remained steady. Through nine months, Northrop Grumman paid about $1.0 billion in dividends and repurchased $68 million of shares.
What Does the Raised 2026 Guidance Mean?
The raised guidance lifts the midpoint of 2026 MTM-adjusted EPS by $0.70, to a range of $29.35-$29.75. MTM-adjusted EPS strips out mark-to-market pension accounting effects. The increase reflects stronger segment performance and a lower expected tax rate.
Segment operating income guidance rose to $4.94-$5.04 billion from $4.85-$5.00 billion, a $65 million lift at the midpoint. Sales guidance was left at $43.75-$44.25 billion, and adjusted free cash flow is expected at $3.1-$3.5 billion.
The guidance change is therefore about margins, execution and taxes, not volume. Management did not raise the top-line outlook despite the strong quarter.
Strategic Context
The quarter shows the weight of the B-21 Raider in Northrop Grumman's earnings mix. Aeronautics is now the fastest-growing large segment, and the B-21 test asset sale shows the program contributing directly to cash flow. Defense Systems growth of 12% points to demand for munitions and missile-related work. Mission Systems and Space Systems, at 2% growth each, lag the portfolio.
The $109.6 billion backlog gives the company multi-year revenue visibility and cushions it against annual appropriations uncertainty in Washington. Aerospace and defense peers have also been reporting this week, and the sector has been a focus for investors weighing elevated global defense budgets.
What Comes Next for Northrop Grumman?
The next test is converting the backlog into sales at current margins while keeping cash conversion strong. Full-year free cash flow guidance of $3.1-$3.5 billion implies a fourth quarter lighter on cash than the third, which benefited from the one-time B-21 asset sale proceeds.
Investors will watch whether Aeronautics and Defense Systems sustain double-digit growth, and whether Mission Systems and Space Systems accelerate. The company's fourth-quarter report, which will also carry 2027 guidance, is the next catalyst.
Outlook
Northrop Grumman enters the final quarter of 2026 with a record backlog, a higher earnings floor and stronger cash flow. The share-price jump of about 7% reflects a quality beat on profit and guidance rather than a revenue surprise. The B-21 program and Defense Systems volume are the main growth drivers, and the lower-growth segments are the main swing factor for 2027.
Mentioned tickers: NOC
