Northrop Stock Tumbles on Sales Disappointment. When Good Isn’t Good Enough.

Northrop Grumman reported third-quarter earnings that beat analysts’ forecasts but sales that missed expectations. (Photograph by Frederic J. Brown/AFP/Getty Images)

Key Points

• Northrop Grumman’s stock declined 2.8% after cutting full-year sales guidance despite beating third-quarter earnings expectations.
• Third-quarter sales increased 4.3% to $10.4 billion, missing Wall Street’s expectation of $10.7 billion.
• The company lowered its full-year sales forecast to $41.7 billion-$41.9 billion, down from $42.1 billion-$42.3 billion.

Northrop Grumman stock slid Tuesday after the defense contractor slashed its full-year sales guidance and posted a mixed third quarter.

High expectations bit the company this earnings season.

Northrop reported earnings of $7.67 a share, handily beating the $6.44 analysts had expected, according to FactSet. While sales increased 4.3% in the quarter to $10.4 billion, they missed Wall Street expectations of $10.7 billion.

The aerospace and defense giant also cut its full-year sales guidance to a range of $41.7 billion to $41.9 billion, down from $42.1 billion to $42.3 billion, adding that it anticipates lower sales in its aeronautics-systems business.

Northrop did raise its full-year earnings outlook, guiding for adjusted earnings between $25.65 and $26.05 a share, up from $25 to $25.40 a share. That guidance, however, implies fourth-quarter earnings per share of about $6.75. Wall Street currently projects $7.56 a share, according to FactSet.

The stock traded as low as $571.36, but closed at $599.35, down 0.5%. Peers Lockheed Martin and RTX were mixed. Lockheed fell 3.2%, while RTX rose 7.7%. Both companies posted solid third-quarter earnings and hiked full-year guidance on Tuesday.

Part of the problem for Northrop stock appears to be the starting point. Expectations were running high, given recent stock performance. Coming into Tuesday trading, shares were up 28% year to date, boosted by growing defense spending in the U.S. and around the globe.

Northrop expects sales to grow 8% year over year in the fourth quarter, but new guidance implies sales of about $11.5 billion, just short of what analysts are projecting.

What’s more, Northrop offered an early look at 2026. It expects sales to grow by a “mid-single digit” percentage. That implies 2026 revenue of just under $44 billion, about $500 million short of Wall Street estimates.

That growth isn’t bad. Between 2020 and 2024, Northrop sales grew less than 3% a year on average.

“Overall, a mixed performance from Northrop, and arguably a bit of a deflation after last quarter’s result,” wrote Vertical Research Partners analyst Rob Stallard in a Tuesday note.

After second-quarter results, Northrop’s stock jumped 9.4% after the company posted better-than-expected sales and earnings.

Stallard rates shares Hold and has a $602 price target for the stock.

Year-to-date gains have left Northrop shares trading for about 21 times earnings, up from about 19 times a year ago.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com