Key Stats for Northrop Grumman Stock
- Year-to-Date Performance: 20%
- 52-Week Range: $426 to $716
- Valuation Model Target Price: $790
- Implied Upside: 15%
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What Happened?
Northrop Grumman stock has climbed about 20% year to date, recently trading near $685 per share and approaching its 52-week high of $716. The move reflects steady buying interest as defense names benefit from strong budget visibility and earnings momentum.
The rally accelerated after Northrop reported strong Q4 2025 results, with sales up 10% year over year to $11.7 billion and adjusted EPS of $7.23.
Full-year sales reached $42 billion, free cash flow rose 26% to $3.3 billion, and backlog hit a record over $95 billion on more than $46 billion of net awards.
CEO Kathy Warden said, “2025 was a strong year for our company, and we are well positioned to continue this success into 2026 and beyond,” reinforcing confidence in continued growth.
Institutional positioning has been mixed but constructive. Wealthfront Advisers increased its stake by 15.6% to 17,942 shares worth about $10.93 million, and Alps Advisors raised its position by 49.9% to 4,428 shares valued at roughly $2.70 million.
Meanwhile, Johnson Investment Counsel, Nuance Investments, and Appleton Partners reduced exposure, reflecting portfolio rebalancing after strong gains.
Investors also digested insider activity after CEO Kathy Warden sold 20,000 shares on February 6 at an average price of $708.82 per share for total proceeds of $14,176,400, reducing her stake by 10.44% to 171,602 shares.
Despite that transaction, strong earnings and record backlog momentum have supported the stock’s 2026 rally.
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Is Northrop Grumman Undervalued?
Under valuation assumptions, the stock is modeled using:
- Revenue Growth (CAGR): 5.3%
- Operating Margins: 10.9%
- Exit P/E Multiple: 23.1x
Revenue growth is supported by long-cycle defense programs already secured in backlog. The company exited 2025 with over $95 billion in backlog and guided 2026 sales to $43.5 billion to $44 billion, reflecting mid-single-digit growth across Aeronautics, Defense Systems, Mission Systems, and Space.
Growth drivers include B-21 production ramp, missile defense expansion, increasing munitions demand, and international orders for systems such as IBCS and advanced radar platforms.
International sales grew 20% in 2025, and management expects international book-to-bill above 1 again in 2026, which supports multi-year revenue visibility.
Margin durability near 11% reflects disciplined execution and favorable mix across higher-value programs. Free cash flow of $3.3 billion in 2025, up 26%, supports reinvestment in production capacity, including solid rocket motor expansion and advanced systems manufacturing.
Based on these inputs, the valuation model estimates a target price of $790, implying about 15% total upside over roughly 2.9 years, or about 5.1% annually.
Since the projected annual return exceeds 5%, the stock screens as modestly undervalued under these assumptions.
At current levels near $685, Northrop Grumman appears undervalued, with future performance driven by backlog conversion, production scaling, international demand growth, and sustained global defense spending rather than multiple expansion.
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