NOC
The beat wasn’t the headline
Northrop Grumman came in with a solid first quarter, which should’ve been a nice little victory lap. Instead, the stock took one look at the bigger picture and said, “Cool, but what about the check?”
The B-21 is getting expensive
The real story here is the company’s B-21 stealth bomber program. Northrop and the Air Force agreed to boost annual production by 25%, and that ramp will lean on a mix of $4.5 billion from last year’s reconciliation bill plus $2.5 billion of company-funded investment in new facilities.
That’s great if you’re rooting for more bomber output. Less great if you’re watching free cash flow like a hawk. The company now expects 2026 capex to rise by $200 million, and management still didn’t move its 2027 and 2028 free cash flow targets. Translation: investors are being asked to swallow more spending without getting a fresh promise of payoff.
Why investors still care
BTIG’s Andre Madrid kept a Buy rating and slapped on an $815 price target, arguing the B-21 is still a long runway story. The analyst also pointed to a few other tailwinds in the wings:
- accelerating Sentinel growth
- strong missile defense and munitions demand
- a chunky international pipeline
- possible upside from big contract hunts like F/A XX, Golden Dome, and CCA
Big picture: Northrop’s core defense story still looks sturdy, but in the market’s favorite game of “show me the cash,” higher capex is the annoying plot twist.