Northrop Grumman’s record $104.7 billion backlog offers substantial long-term upside, but B-21, Sentinel, and space execution must convert demand into margins.
Overview
Northrop Grumman is a global aerospace and defense prime organized across Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems. It sells complex hardware and platforms alongside long-term sustainment and engineering services, with approximately 84% to 85% of sales tied to the U.S. government and 15% to 16% to allied sovereign customers. The company is strategically embedded in nuclear modernization, stealth aviation, secure communications, missile defense, and space intelligence through programs including B-21 and Sentinel. **Backlog visibility is exceptional:** Q2 2026 net awards reached a record $20 billion, book-to-bill was 1.84x, and backlog rose to $104.7 billion, with approximately 55% expected to convert to revenue within 24 months. Q2 revenue increased 5.1% year over year to $10.88 billion and adjusted free cash flow rose 54% to $978 million, although segment margin declined 120 basis points to 10.6% because of fixed-price program pressures. Management raised 2026 sales guidance to $43.75 billion-$44.25 billion and adjusted EPS guidance to $28.60-$29.10. The investment case depends on B-21 and Sentinel transitioning into higher-rate production, while near-term catalysts include second-half margin recovery, GEM 63XL return-to-flight progress, and continued production-capacity expansion. At $511.00, the report’s probability-weighted 2031 target is $803.56.