Earnings jump and advanced programs put Northrop Grumman in focus

Northrop Grumman (NOC) just reported a strong first quarter, with revenue of US$9,881m and net income of US$875m, along with fresh progress on its AI space platform and B-21 Raider test program.

Despite the strong first quarter update and progress on programs like the B-21 Raider and AI space platforms, the share price has slipped recently. The 30 day share price return is 15.3% and the 90 day share price return is 13%, while the 1 year total shareholder return of 23.5% and 5 year total shareholder return of 75.9% show that longer term holders have seen much stronger gains. This suggests recent momentum has cooled after a solid multi year run.

If Northrop Grumman’s advanced defense and space work has your attention, it could be a good moment to look across the broader defense and aerospace supply chain through our robotics and automation ideas, starting with 35 robotics and automation stocks.

With Northrop Grumman shares easing over the past month despite solid recent returns and high profile programs like the B-21 and AI space platforms, is this a genuine value gap or are markets already pricing in future growth?

Most Popular Narrative: 20.3% Undervalued

With the most followed narrative putting fair value at $721.78 against a last close of $575.11, the gap between model and market is hard to ignore and is built on detailed assumptions around defense demand, margins, and valuation multiples.

The ramp-up of advanced autonomous and integrated systems such as Beacon and IBCS, combined with ongoing investments in solid rocket motor capacity (targeting a near-doubling by 2029), positions the company to capitalize on high-growth, higher-margin market segments, thereby enhancing future operating margins and underlying cash flow.

Read the complete narrative. Read the complete narrative.

Curious what sits behind that fair value gap? The narrative leans heavily on steady revenue expansion, resilient margins, and a future earnings multiple that differs from today. Want to see which specific growth and profitability assumptions that hinges on, and how they tie back to big ticket programs like B-21 and space systems? The full narrative lays out those moving pieces so you can decide how closely they match your own expectations.

Result: Fair Value of $721.78 (UNDERVALUED)

However, this hinges on major U.S. defense programs like B-21 and Sentinel staying on track, and on cost overruns not eroding already modeled margins.

Another View: Cash Flow Model Points The Other Way

While the analyst narrative points to a fair value of $721.78 and an undervalued share price, the Simply Wall St DCF model currently points lower, with an estimated future cash flow value of $497.83 and NOC trading above that level. So which signal do you put more weight on: earnings or cash flows?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Northrop Grumman for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 54 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With mixed signals from earnings, cash flow, and high profile programs, sentiment is understandably split. Move quickly, review the data yourself, and consider how you weigh the 4 key rewards and 2 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.