Northrop raises 2026 profit and EPS guidance as third-quarter sales rise 7 percent from a year earlier

Northrop Grumman raised its 2026 guidance for segment operating income and MTM-adjusted earnings per share on October 20, after third-quarter sales rose 7 percent from a year earlier to $11.1 billion and net awards of $16.4 billion lifted backlog to $109.6 billion. Diluted earnings per share were $7.89, up from $7.67 a year earlier, as reported net earnings of $1.1 billion edged 2 percent higher.

Guidance rises on margin rather than on sales

Northrop now expects 2026 segment operating income of $4.94 billion to $5.04 billion, up from $4.85 billion to $5 billion in July, and MTM-adjusted earnings per share of $29.35 to $29.75, up from $28.60 to $29.10. The company put the increases at $65 million and $0.70 at the midpoints. The sales range held at $43.75 billion to $44.25 billion and adjusted free cash flow guidance held at $3.1 billion to $3.5 billion; Northrop had already raised the sales range in July, to $43.75 billion to $44.25 billion from $43.5 billion to $44 billion, so this quarter's revision moved the profit lines instead. Inside the segments, Aeronautics Systems is now guided to a margin rate in the high 9 percent range, against mid-to-high 9 percent three months ago, while Mission Systems is guided to mid 15 percent against about 15 percent.

Aeronautics carries the quarter as pension accounting trims the margin

Third-quarter sales rose 7 percent to $11.1 billion from $10.4 billion, with Aeronautics Systems up 14 percent to $3.58 billion and Defense Systems up 12 percent to $2.31 billion. Aeronautics operating income climbed 24 percent to $377 million and its margin widened to 10.5 percent from 9.7 percent, helped by higher net contract margin adjustments on mature production and sustainment programs.

Mission Systems grew sales 2 percent to $3.16 billion, but operating income fell 3 percent to $500 million and its margin narrowed to 15.8 percent from 16.7 percent, a comparison the release ties partly to a prior-year $68 million favorable adjustment in the restricted advanced microelectronics portfolio. Space Systems sales rose 2 percent to $2.75 billion after $136 million of lower Commercial Resupply Services volume on launch timing, and its margin improved to 11.3 percent from 11.0 percent on a contract mix that shifted toward fixed-price work.

Consolidated operating income rose 2 percent to $1.27 billion while the operating margin fell to 11.4 percent from 11.9 percent, which the company attributed principally to a $52 million decrease in the FAS/CAS operating adjustment — a pension-cost line, not a program charge. Segment operating income rose 5 percent to $1.35 billion, and the segment margin slipped to 12.1 percent from 12.3 percent.

A $371 million equipment sale lifts free cash flow

Adjusted free cash flow was $1.81 billion, up 44 percent from $1.26 billion a year earlier, and net cash from operating activities was $1.75 billion against $1.56 billion. The adjusted figure counts $371 million of proceeds from the sale of equipment to a customer, which the company's definition permits: the release says the measure “includes proceeds from the sale of equipment to a customer, if any, as such proceeds were generated in a customer sales transaction.” Removing the proceeds leaves $1.44 billion, about 15 percent above the prior-year figure rather than 44 percent.

Nine-month operating cash flow was $1.37 billion against $860 million, and nine-month adjusted free cash flow was $965 million against $72 million. Capital return shifted toward the dividend: $1.04 billion of dividends paid against $964 million a year earlier, with share repurchases down to $68 million from $1.17 billion. Cash and equivalents stood at $3.74 billion on September 30, down from $4.4 billion at the start of the year.

Backlog, a shutdown caveat and the fourth quarter

Net awards were $16.4 billion, a book-to-bill ratio of 1.5x, and backlog reached $109.6 billion, up 15 percent from $95.68 billion at December 31, 2025. Backlog as of September 30 ran 31 percent above the year-end figure at Defense Systems, 16 percent higher at Aeronautics Systems, 7 percent higher at Mission Systems and 1 percent higher at Space Systems.

At the bottom of the sales range, fourth-quarter revenue would be $11.87 billion, about 7 percent above the third quarter's $11.1 billion; the top of the range implies $12.37 billion. Neither figure is company guidance for the quarter. Warden framed the outlook around demand — “In a complex world with the growing need for solutions that scale and perform, our customers continue to turn to Northrop Grumman, and we are delivering with urgency and innovation” — and pointed to “our 2027 outlook,” though the release contains no 2027 forecast table. It does warn that guidance does not capture “impacts on the company from, a prolonged government shutdown, or application of spending limits or other spending cuts.” Northrop filed the results as an exhibit to a Form 8-K reporting results of operations, and its earnings call is scheduled for 9:30 a.m. Eastern on October 20; the Form 10-Q that follows will carry the full financial statements.