Northrop holds $109.6 billion of backlog after a strong third quarter and guides to faster 2027 growth. I see $31.14 of 2027 profit worth 19.5 times, or $607.27, for 14 percent upside.
Key points
- $109.6 billion backlog at September 30 funds about 2.4 years of my 2027 sales view.
- $29.55 a share 2026 profit at the new guidance midpoint after a $0.70 a share raise.
- $3.5 billion 2027 free cash flow at the guidance top despite $2.1 billion of factory spending.
The call
The market expects a pause, not a ramp. At $531.55 the stock trades at 18.0 times adjusted profit. That 2026 profit of $29.55 a share implies slow growth with no credit for faster sales. The 31 percent fall from the high leaves skepticism about fixed price risk.
Quarterly sales rebuild momentum into Q4 ($ billions)SEC XBRL and earnings releases through Oct 20, 2026; Q4 FY26E is mine from $44.0B guidance midpoint.
Growth should accelerate with wider margins instead. Sales should rise 6 percent to $46.6 billion as B-21 and Sentinel ramp. Margin, the share of sales kept as segment profit, should reach 11.5 percent on richer production mix. Backlog cover and international demand give visibility the current multiple misses.
Valuation
| Measure | Figure |
|---|
| 2027 sales | $46.6 billion |
| 2027 segment margin | 11.5% |
| 2027 adjusted profit | $31.14 a share |
| Target multiple | 19.5 times |
| 12-month target | $607.27 a share |
A 19.5 multiple fits a prime defense maker with steady growth and record orders. The $9.88 annual dividend pays 1.9 percent while waiting. Upside of 14.2 percent with 2.4 years of backlog cover supports a buy.
Target sensitivity to the 2027 multiple ($ per share)Mine from $31.14 of 2027 adjusted profit; target uses 19.5 times.
Risks
- B-21 fixed price production burns the $1.0 billion reserve, visible in new quarterly charges and falling Aeronautics margin.
- Congress extends the funding freeze past December 11, visible in slow awards and quarterly book to bill below 1.0 times.
- Heavy fourth quarter spending disappoints, visible in capital near $1.0 billion with flat full year adjusted free cash flow.
What would change my mind
Flat backlog or a fresh B-21 charge that breaks 2027 margin expansion would end the growth case.