Truist Securities has kept a Hold recommendation on Northrop Grumman and maintained a $623.00 price target following the defense contractor's fourth-quarter 2025 report. The stock was trading at $678.92, just under its 52-week peak of $683.01. Market data included with the results indicate the shares may be slightly overvalued relative to an internally calculated Fair Value.
In its post-earnings assessment, Truist emphasized that the demand environment for Northrop Grumman remains robust. Still, the firm said free cash flow will be the metric investors should monitor closely going forward. Truist described its 2026 outlook as likely conservative, noting that the forecast does not incorporate the potential for new awards or contract wins that could boost revenue.
Financial-condition metrics attached to the coverage show the company with a financial health score of 2.59, categorized as "GOOD." Management commentary and Truist's review both point to a balance between steady demand and the need for substantial capital deployment to support future programs.
Truist warned that any revenue upside is likely to arrive alongside margin dilution and higher investment requirements. In particular, management has signaled that if the B-21 program accelerates, Northrop Grumman would expect to invest between $2 billion and $3 billion to support the effort. That potential funding need has been reflected in an adjusted free cash flow target of $4 billion for 2028.
The company carries a moderate leverage profile, with a reported debt-to-equity ratio of 1.05. On order trends, management expects a book-to-bill of roughly 1x for 2026, with international book-to-bill exceeding that 1x level. Management also indicated that growth should pick up in 2027, according to commentary cited in Truist's note.
Northrop Grumman's stock performance over the last year has been strong, producing a 41.9% price total return. The shares trade at a price-to-earnings ratio of 22.99 based on recent data.
On modeling, Truist revised its 2026 earnings-per-share estimate lower. The firm attributed $0.36 of that reduction to expectations of reduced share repurchase activity, which diminishes EPS through a smaller buyback impact. Dividend history remains a positive structural element for income investors: the company has raised its payout for 22 consecutive years and maintained dividend payments for 55 consecutive years, with the current yield at 1.36%.
Northrop Grumman reported an adjusted EPS of $7.23 for the fourth quarter of 2025, topping analyst estimates of $6.99. Revenue for the quarter was $11.7 billion, above the consensus expectation of $11.61 billion. Following the quarterly disclosure, several peer firms adjusted their views and price targets higher: two firms lifted their targets to $750 while keeping Outperform and Buy stances, and another increased its target to $688, calling the quarter a consequential one for the U.S. defense industry.
Beyond financials, Northrop Grumman continues to have program-level relevance in high-profile missions. The company's solid rocket boosters are slated to power NASA's Artemis II mission, the first crewed flight beyond the Moon since Apollo, currently scheduled for February 2026. That mission plans to send four astronauts on a circumlunar flight.
Analysts who reviewed the quarter highlighted the firm's strategic positioning in balancing new commercial requirements with deep-rooted mission expertise, noting this as a factor in maintaining the company's influence across defense and aerospace programs.
What to watch next
- Free cash flow trajectory and whether the company meets the revised 2028 target of $4 billion.
- Announcements of new contract awards or accelerated program timelines that could alter 2026 guidance.
- Share repurchase activity and its effect on 2026 EPS.