$NOC · NORTHROP GRUMMAN CORP /DE/
Northrop Grumman filed its Q3 FY2026 10-Q, reporting sales of $11.122B (+6.7% YoY), net earnings of $1.124B, and diluted EPS of $7.89. All four segments grew, led by Aeronautics Systems at +14%. Operating margin dipped to 11.4% from 11.9% a year ago. The effective tax rate fell to 13.4% from 16.9%. $2.5B remains on the $3.0B share repurchase authorization, with no buybacks executed in Q3.
- Q3 sales rose 6.7% YoY to $11.122B, with all four sectors posting growth including +14% at Aeronautics Systems.
- Diluted EPS of $7.89 beat prior-year $7.67; YTD EPS of $21.72 is up 14% from $19.12.
- Operating margin contracted 50 bps YoY to 11.4% (from 11.9%), driven by higher G&A and product costs.
- Net EAC adjustments contributed $221M to operating income in Q3 vs. $81M a year ago, a 173% increase.
- Effective tax rate dropped to 13.4% from 16.9%, boosting net earnings to $1.124B from $1.100B.
NOC closed the regular session at $534.00, up 4.57% on the day. Extended-hours trading shows no additional move beyond the regular-session gain, suggesting the Q3 beat was largely priced in during the day.
Broad-based revenue growth across all four segments plus a 173% jump in favorable EAC adjustments signal strong program execution, but the B-21 loss accrual remains a material earnings risk.
Northrop's 6.7% top-line growth and 14% Aeronautics surge reflect the defense sector's broad tailwind from elevated global security spending. The margin compression to 11.4% mirrors peer struggles with fixed-price development program risk.
B-21 Raider LRIP cumulative losses total ~$2.0B with $1.0B remaining loss accrual; any further cost overruns on this fixed-price development program could materially pressure margins. EAC adjustments, while favorable this quarter, remain a source of volatility.
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