Record $110 billion backlog and a 5, 7 percent 2027 sales outlook support about $32 of earnings. At 17.5 times that is a $560 stock, a market-like return from $532 including the dividend.
Key points
- $110 billion backlog at September 30, book-to-bill 1.5 times, 35 percent converting in 12 months.
- 5, 7 percent 2027 sales growth and 10, 20 basis points of segment-margin expansion is management’s first outlook.
- 18 times 2026 MTM-adjusted EPS of about $29.55 is what $532 requires.
The call
The stock at $532 needs about 18 times this year’s $29.55 of MTM-adjusted profit, or 16.6 times my $32 of 2027 earnings. That is a full multiple for mid-single-digit growth and remaining B-21 and Sentinel estimate risk.
I model $46.6 billion of 2027 sales and $31.80, $32.00 of earnings. A 17.5 times multiple, in line with large-cap primes, produces a $560 stock. Add the $9.88 dividend and the total return is market-like, not a bargain.
Sales ($ billions) and my 2027 outlookSEC filings through Q3 2026; 2026E and 2027E are mine from company outlook
Valuation
| Item | Figure |
|---|
| 2026 sales (guide midpoint) | $44.0 billion |
| My 2027 sales (6% growth) | $46.6 billion |
| My 2027 EPS | $32.00 |
| Multiple | 17.5 times |
| 12-month target | $560 |
Defense primes with similar growth trade 16, 19 times next-year earnings. The extra 0.5 turn versus 17 times pays for backlog visibility; it does not pay for a spin of microelectronics that has no date or proceeds. Asymmetry is modest: a 15 times multiple on the same earnings is $480, a 19 times multiple is $608.
Risks
- Another B-21 LRIP charge would cut EPS and the multiple; watch remaining $1.0 billion loss accrual and lot pricing.
- A long continuing resolution past December 11 delays new starts; watch Q4 awards versus the 1.3 book-to-bill guide.
- Capex near $2.1 billion in 2027 can stall free cash if working capital does not offset it.
What would change my mind
A funded B-21 rate increase that lifts 2028 sales growth above 8 percent with no new loss, or a microelectronics separation with a disclosed value.