Northrop Grumman beats Q3 profit view by $0.71, raises 2026 EPS outlook on record $109.6B backlog

NOC reported third-quarter 2026 diluted EPS of $7.89 before the open on Oct. 20, beating the $7.18 consensus by $0.71 a share. Sales rose 7% to $11.12 billion, in line with estimates. The company raised its full-year MTM-adjusted EPS guidance to $29.35 to $29.75 from $28.60 to $29.10, above the $28.98 consensus, and lifted segment operating income guidance by $65 million at the midpoint to $4.94 billion to $5.04 billion. It held sales guidance at $43.75 billion to $44.25 billion and adjusted free cash flow guidance at $3.1 billion to $3.5 billion.

Orders were the standout. Net awards of $16.4 billion produced a 1.5x book-to-bill and a record backlog of $109.6 billion, about $110 billion, up 15% from the end of 2025. Third-quarter awards included $4.6 billion for restricted programs, $2.0 billion for Sentinel, $1.4 billion for Virginia-class submarines, $1.3 billion for F-35 and $1.0 billion for E-2, per the company's release.

Growth came from aircraft and strategic programs. Aeronautics sales rose 14%, with F-35 adding $195 million alongside higher B-21 volume, and Defense Systems sales rose 12% as Sentinel added $180 million. Mission Systems margin slipped to 15.8% from 16.7%, partly because the prior year included a $68 million favorable contract adjustment, and Space sales rose 2%. Management said the Air Force approved Sentinel design maturity for first flight to proceed in 2027.

The beat is mostly clean. The release shows no one-time gains or charges in the quarter, and segment operating margin actually dipped to 12.1% from 12.3%, but a lower tax rate helped: 13.4% versus 16.9% a year earlier, on higher research credits. Northrop shares closed up about 4.6%, per SentiSense market data, well ahead of RTX, which also raised its outlook the same morning. What to watch: whether the research-credit benefit recurs, the pace of B-21 charge burn-down, and congressional action on the fiscal 2027 defense budget.