Northrop Grumman $NOC Rides Unprecedented Defense Demand Wave

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•  19 Feb 2026
 

•   NOC  
   
  +0.67%

The global defense industry is entering a new growth phase, and financial markets are reacting. Rising order volumes, expanding defense budgets in multiple countries, and deeper government involvement are reshaping how investors value companies in the sector.

At the center of attention is Northrop Grumman $NOC, one of the largest U.S. defense contractors. CEO Kathy Warden highlighted at a Citi investor conference that demand for advanced systems remains strong and is not limited to the United States. Other nations are also increasing military spending amid ongoing geopolitical tensions and shifting regional power balances. Warden noted that the company is experiencing an unusually large order cycle, which she expects will not end in the short term.

Northrop operates in strategic areas such as nuclear systems, missiles, and space, placing it at the core of new defense initiatives, including the U.S. "Iron Dome" project and the development of unmanned aircraft for integrated combat.

Alongside growing demand, the company faces increased government scrutiny. Former President Trump threatened to limit share buybacks and dividend payments for companies that do not meet development targets, schedules, or budgets. The message encourages reinvestment in development and production. In response, Northrop recently paused its share repurchase program to redirect capital toward operational investments while maintaining its quarterly dividend of $2.31 per share.

Government intervention goes beyond oversight. The U.S. Department of Defense has begun directly investing in companies within the defense supply chain. For example, the government holds a stake in MP Materials and plans to invest around $1 billion in a missile company spun off from L3Harris. Direct government equity investments represent a structural shift: they provide needed capital to expand production capacity but also raise questions about future bidding processes and the balance between government-backed and fully private companies. Warden emphasized that Northrop considers itself the best positioned to invest in its missile operations and aims to retain full control over areas with clear internal synergies. Other companies may pursue different public-private partnership models, particularly in segments requiring substantial capital or where smaller suppliers need financial support, while overall industrial stability remains a priority.

$NOC shares have risen roughly 67% over the past 12 months and now trade at a forward P/E of about 26, up from 15 a year ago. This increase reflects expectations for improved growth and profitability. Analysts project average earnings growth of roughly 7% in the coming years after a prolonged period of relative stagnation. These forecasts have been revised upward recently due to strong order flow and growing demand for missile and air defense systems. Meanwhile, the company continues to advance the Sentinel program, the next generation of intercontinental ballistic missiles, designed to replace the U.S. land-based missile component within the nuclear triad that also includes submarines and strategic bombers.

The program has faced significant delays, prompting a government review. A key decision on whether to proceed to full development, known as Milestone B approval, is expected by year-end. If approved, the Air Force estimates the new system could enter service in the early 2030s. In the meantime, Northrop and the government have begun constructing a prototype launch silo in Utah, a step toward modernizing the U.S. ground-based nuclear deterrent.

Recent results show Northrop reported quarterly earnings of $7.23 per share on $11.7 billion in revenue, above market expectations of $6.98 per share and $11.6 billion in revenue. Compared to the same quarter last year, when EPS was $6.39 on $10.7 billion in revenue, the company has improved. The order backlog reached a record $95.7 billion, with new orders exceeding quarterly sales.

Annual guidance was slightly below consensus: Northrop projects $27.40–$27.90 EPS versus analysts’ $28.91, with revenue guidance of $43.5–$44 billion, near 5% growth but below market expectations of $44.3 billion. Operating profit guidance is around $4.9 billion, slightly above analyst estimates.

In summary, Northrop continues to show improving performance, with growth above recent averages of roughly 3% annually. Still, after a substantial rally, the market expects continued acceleration in earnings and order flow to justify current valuations. Investors watching $NOC are balancing strong opportunity with the risks inherent in government-dependent sectors.

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