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Call sheet · Q3'26

Northrop Grumman (NOC)

Q3'26 earnings call · held October 20, 2026 · compared with the Q2'26 call · management-credibility review
9/12
Disclosure score
3 medium flags
Financial quality
Bottom line
Northrop has strong backlog and sales growth, but the quality of the cash and earnings comparison matters. The $371M asset sale explains much of the adjusted free cash flow increase, and a lower tax rate helped EPS while operating margin declined year over year. Track 2027 capital spending and program economics, and wait for concrete quantum transaction terms rather than assuming either a windfall or funding distress.

The 30-second version

  • Backlog grew, while operating margin declined year over year
  • The cash-flow increase includes a disclosed asset sale
  • Quantum options are under review, not a completed transaction

What changed this quarter

MetricQ2'26Q3'26Change
Total Sales$10.9B, +5% YoY$11.1B, +7% YoY+200bps acceleration
Diluted EPS$7.68$7.89, +3% YoYUp 3% YoY; effective tax rate fell to 13.4% from 16.9%
Segment Operating Income GrowthDecreased slightly YoY+5% YoY, margin 12.1%Reversed from decline to growth
Backlog$105B, +17% YoY$110B, +20% YoY (record)+300bps acceleration
Book-to-Bill (quarterly)1.84x1.5x (1.45x YTD)Lower sequential ratio, still above 1.0x
Adjusted Free Cash Flow~$1.0B$1.8B, +40% YoY, incl. $371M one-time B21 test asset saleUp 44% YoY; $371M sale proceeds account for about two-thirds of the $554M increase
CapEx$320M$306MFlat-to-down sequentially ahead of 2027 step-up
Aeronautics (AS) Sales/Margin+13%, 10.3% margin+14%, 10.5% marginContinued strength, B21 ramping
Defense Systems (DS) Sales/Margin+2% organic, 7.5% margin (SAW drag)$2.3B, +12%, 10.8% marginSharp reacceleration post-SAW charge
Mission Systems (MS) Sales/Margin+3%, 15.4% margin+2%, 15.8% marginMargin up, top line decelerating

Accountability tracked

7 new promises made1 narrative shift flagged7 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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