Vertical Research Partners raised its price objective on Northrop Grumman (NOC) to $688.00 from $625.00 while keeping a Hold recommendation following the company’s fourth-quarter results. The stock is trading at $678.74, slightly above its 52-week high of $677.30. Analyst targets for the company span from $576 to $777 based on available consensus data.
The research firm characterized Northrop’s fourth-quarter performance as "fine," but said the quarter represents a watershed moment for the U.S. defense industry. Vertical Research highlighted a noticeable shift toward greater contractor-funded investment in capital expenditures and internal research and development. That change in spending behavior, the firm argued, signals a different posture across the sector compared with prior periods when government support funded a larger share of such investments.
Vertical Research pointed to Northrop’s suspension of its share buyback program and other recent industry developments as evidence that government support is not as broadly available at previous levels. The firm interpreted these dynamics as a sign that defense contractors are increasingly taking on the financial burden of long-lead programs and technology development.
In response to its reassessment, Vertical Research adjusted its earnings-per-share outlook for Northrop Grumman. The firm reduced its 2026 EPS estimate from $29.16 to $27.89 and cut its 2027 projection from $31.55 to $29.77. At the same time, it forecast free cash flow of $3.4 billion for the current year, rising to $3.6 billion next year.
To derive the new price objective, Vertical Research raised its blended target multiple to 25 times from 21 times. That higher multiple, applied to the firm’s updated cash flow outlook, is the proximate driver of the increased $688 target despite the trimmed EPS forecasts.
Northrop reported fourth-quarter adjusted earnings per share of $7.23, ahead of the $6.99 consensus estimate. Revenue for the quarter came in at $11.7 billion, exceeding the expected $11.61 billion. Those results underscore a solid financial showing in the period despite the broader industry dynamics noted by Vertical Research.
Separately, Northrop Grumman’s twin five-segment solid rocket boosters are slated to power NASA’s first crewed mission beyond the Moon since Apollo. The launch is scheduled for February 6, 2026, as part of the Artemis II mission, which will carry four astronauts on a roughly 10-day journey around the Moon. The program highlights Northrop’s role in both defense and civilian space activity.
Implications for markets and sectors - The analyst action and the company’s results affect investor views on defense and aerospace contractors, space program suppliers, and the broader industrials sector, particularly around capital allocation and free cash flow expectations. Capital markets will weigh the revised EPS trajectory and the elevated valuation multiple against the company’s near-term buyback suspension and rising contractor-funded investment.