Northrop Grumman raises 2026 forecasts on strong weapons demand

July 21 (Reuters) – Falls Church-based defense supplier Northrop Grumman on Tuesday lifted its 2026 sales and adjusted profit forecast, supported by sustained demand for weapons amid a wave of geopolitical conflicts.

U.S. President Donald Trump has been pressing defense companies to expand manufacturing capacity and boost weapons production as the wars in Ukraine and the Middle East drain the country’s stockpiles.

The U.S. has expended more than 50,000 rockets, missiles and other rocket-propelled projectiles since the beginning of the Russia-Ukraine conflict in 2022 through the war with Iran, according to data from the Pentagon.

However, shares were down 2.4% in early trading in New York as operating income in two of Northrop’s four business segments fell from last year.

While companies await Pentagon budget appropriations, pressure is building for defense contractors to increase capital spending and expand production capacity to meet demand.

Revenue in Northrop’s defense systems business rose 5%, helped by strong sales in its Sentinel program but operating income fell 38%.

This comes as the company spends more to develop and qualify its air-to-surface missile, Stand-in Attack Weapon and mature production for the long-range version of the Advanced Anti-Radiation Guided Missile.

Operating income in the company’s space segment declined 16% after projected costs to complete its GEM 63XL rocket motor increased, following an anomaly during a launch earlier this year.

The company expects to begin delivering the redesigned motors by the end of the year, an executive said on the earnings conference call.

“Given the market’s tendency to punish execution challenges, we could see pressure on the stock, though we do not believe expectations for the quarter were very high,” said Seth Seifman, analyst at JP Morgan.

Northrop’s largest revenue segment, Aeronautics, posted a 13% increase in second-quarter sales compared with a year earlier, driven by strong performance in the B-21 Raider program and other classified programs.

The B-21 Raider, a nuclear-capable long-range strike aircraft, received a major production boost in February, when Northrop signed an Air Force agreement expanding production capacity by 25%, with the first delivery set for 2027.

Excluding items, the company now expects 2026 profit between $28.60 and $29.10 per share, compared to a prior range of $27.40 to $27.90 apiece.

“With the recent agreements on B-21 and the strong sales results in 2Q26, we believe the guide could be conservative,” said Herbert Ken, analyst at RBC.

The company reported total sales of $10.88 billion for the quarter ended June 30, compared to analysts’ expectations of $10.81 billion. Its total backlog rose 9% to $104.7 billion during the period – a record.

Its per-share quarterly profit stood at $7.68, compared with $8.15 a year earlier, with the latter including a $1.04 benefit from the divestiture of Northrop’s training services business. Analysts on average expected $6.82 per share.

The beat in quarterly profit was primarily due to a lower tax rate, according to analysts at JP Morgan and TD Cowen.

(Reporting by Aishwarya Jain in Bengaluru and ​Mike Stone in Washington; Editing by Jonathan Ananda and Nick Zieminski)