By Anton Ladnyi, CFA · ex-Goldman Sachs · ex-J.P. MorganPublished Updated
NOC — Northrop Grumman at ~$556 on ~17x forward P/E with Q1 2026 EPS $6.14 (+85% YoY on easy comp), revenue +4%, $95.6B backlog, B-21 Raider $10.1B FY2026 allocation (up from $5.3B); Sentinel ICBM cost overrun ($141B estimate) and first flight slip to 2028 remain overhangs.
NOC Price Target & Rating
NOC's quantitative grade is Strong Buy, with elevated downside risk (CVaR -21.3%), and quality metrics (net margin 11%, ROE 29%). Northrop Grumman Corporation (NOC) trades at $563.68 with a valuation grade of Strong Buy: a trailing P/E of 17.7x at a 20% discount to sector median, net margins of 10.8%, a DCF-implied intrinsic range of $595–$859 suggesting a +29% margin of safety, beta -0.11 (defensive risk profile).
DCF Valuation Range
Key Takeaways
Valuation: Strong Buy grade — P/E 17.7x — DCF range $595–$859 implies +29% margin of safety
Risk: CVaR -21.3% (95th percentile, 1-month) indicates moderate tail exposure; beta of -0.11 amplifies broad market moves in both directions
Strengths: Size 4.0/5, 11% net margin, 29% ROE dominate the factor profile
Anton Ladnyi, CFA · A.L. Capital AdvisoryUpdated 2026-05-30
Rating Rationale
NOC — Northrop Grumman at ~$556 on ~17x forward P/E with Q1 2026 EPS $6.14 (+85% YoY on easy comp), revenue +4%, $95.6B backlog, B-21 Raider $10.1B FY2026 allocation (up from $5.3B); Sentinel ICBM cost overrun ($141B estimate) and first flight slip to 2028 remain overhangs.
Investment Thesis
↑ Bull Case
B-21 Raider: FY2026 reconciliation allocated $10.1B (nearly double FY2025's $5.3B) — accelerating production and revenue recognition
NOC committed $2.5B company-funded capacity investment to increase B-21 production by 25% — strong management conviction
Northrop/Kratos team selected for $231.5M Marine Corps drone wingman (MUX TACAIR) contract — entering autonomous systems market
$95.6B backlog provides multi-year revenue floor; Space and Mission Systems growing in classified work
EPS $6.14 vs $3.32 Q1 2025 (+85%) though driven by absence of B-21 loss provision; underlying margins improving at 10.8% segment operating
↓ Bear Case
Sentinel ICBM cost estimate ballooned to $141B+ (Nunn-McCurdy breach); first flight slipped 4 years to March 2028; software development flagged by GAO
Q1 2026 FCF -$1.8B (typical H1 pattern but significant); Space Systems headwinds: NGI wind-down and $71M GEM 63XL charge
Revenue growth +4% — the weakest organic growth among large-cap primes in Q1 2026 despite record DoD spending
Stock fell 7% on Q1 earnings day despite the beat — market pricing Sentinel overhang; stock at $556 vs prior year highs
What Changes the Rating
↑Catalyst:Sentinel first flight moving ahead of March 2028 target; Golden Dome space-based intercept layer contract; Space segment margin recovery
↓Stop / exit:Sentinel programme further delayed or restructured at higher cost; B-21 LRIP contract cancelled or reduced; Space segment impairment
Anton’s personal note
The model points to a strong buy and the DCF math backs it — there is real margin of safety here, which is rare at this stage of the cycle. What I watch on this name is earnings consistency — specifically whether delivery against consensus is stable or deteriorating. That is usually where the rating gets confirmed or challenged before the price reflects it. The setup that would make me more positive is a quarter that confirms the operating leverage story. The setup that would make me cautious is any signal that consensus estimates are getting ahead of fundamentals.
— Anton Ladnyi, CFA
Earnings History
NOC Earnings History — EPS Surprise Rate 2026
Quarter
EPS Est.
EPS Actual
Surprise
Q1 2026
$6.06
$6.14
+1.3% ✓
Q4 2025
$6.96
$7.23
+3.8% ✓
Q3 2025
$6.46
$7.67
+18.8% ✓
Q2 2025
$6.80
$8.15
+19.9% ✓
Quarterly EPS — Estimate vs Actual
Earnings Projections
NOC Forward EPS Consensus Estimates 2026
Quarter
EPS Est.
YoY EPS
Analysts
Q2 2026
$6.81
-16.4%
17
Q3 2026
$7.00
-8.8%
17
Q4 2026
~$7.99
+10.5%
21
Q1 2027
~$7.53
+22.6%
21
~ Estimated from annual consensus — not a direct analyst survey
Hover each scenario for detail · current price $563.68
▼
Bear Case
$450
-20.2%
Fwd P/E: 15.3x
2.0 revenue CAGR · 13.0 exit multiple
◆
Base Case
$615
+9.1%
Fwd P/E: 21.0x
6.0 revenue CAGR · 18.0 exit multiple
▲
Bull Case
$760
+34.8%
Fwd P/E: 25.9x
10.0 revenue CAGR · 22.0 exit multiple
Pairwise Correlation Matrix
1 of 10 peer pairs correlated above 0.60 — diversification benefit within this cluster is structurally limited.
Extended Analysis — Buy, Hold or Sell? Risk Factors. Portfolio Fit.
Is NOC a buy, hold, or sell?
NOC carries a valuation grade of Strong Buy. At a trailing P/E of 17.7, the stock trades at a 20% discount to the Industrials sector median of 22.0x. Our discounted cash flow model produces an intrinsic range of $595–$859 — implying a +29% margin of safety at the current price of $563.68. The width of the DCF range reflects genuine uncertainty in the terminal growth rate assumption: the correct framework is a probability-weighted distribution over scenarios, not a single point estimate. See the DCF valuation framework for full methodology.
With a 12% beat rate on recent quarters, earnings predictability has been mixed. The most recent quarter delivered a 1.3% earnings surprise. Analyst estimate revisions are trending flat.
What are NOC's key risk factors?
With a beta of -0.11, NOC exhibits a low-volatility risk profile relative to the broad market. The 95th-percentile CVaR of -21.3% on a one-month horizon should inform position sizing directly: at a 10% portfolio weight, this tail event contributes approximately 2.1% of total portfolio loss in the worst 5% of months. Net margins stand at 10.8%. Return on equity of 28.5% indicates highly efficient capital allocation. Leverage is moderate with debt-to-equity at 103%.
A put/call ratio of 0.87 indicates roughly balanced sentiment in the options market. Implied volatility of 32.3% exceeds realized volatility of 18.0% by 14 points, suggesting options are pricing in elevated risk. Insiders have been net sellers to the tune of $35.2M recently. While routine dispositions are common, the magnitude bears watching. Short interest is low at 1.2% of float, suggesting limited bearish conviction.
How does NOC fit in a diversified portfolio?
At typical HENRY portfolio weights — 10–20% of the equity allocation — NOC carries a beta of -0.11, meaning it amplifies broad market moves proportionally. The appropriate weight is not a function of conviction alone, but of the full covariance structure across all holdings. See the Ledoit-Wolf covariance framework for the methodology behind these calculations.
Among closely correlated names, NOC shows the strongest co-movement with LHX (0.64), RTX (0.53), GD (0.49). Investors seeking diversification should note these correlation dynamics when constructing multi-asset portfolios.
True portfolio risk is a function of the full covariance structure across all holdings — not individual stock metrics. The Portfolio Health Check quantifies this at the portfolio level: it surfaces hidden concentration, marginal CVaR contributions, and the degree to which your overall allocation deviates from an optimal risk-adjusted mandate. The NOC analysis here is a single node in that larger structure.
Northrop Grumman Corporation (NOC) carries a Strong Buy quantitative rating from A.L. Capital Advisory, derived from Discounted Cash Flow intrinsic value analysis, five-factor model scoring (Value, Quality, Momentum, Volatility, Size), and CVaR tail risk measurement. At $563.68, the DCF midpoint margin of safety is +29% (intrinsic value range: $595 bear – $859 bull). Composite factor score: 3.8/5. Strongest factor: Volatility (5.0/5). Weakest factor: Quality (3.0/5). Trailing P/E: 17.7x. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Portfolio Construction Framework →
What is the average analyst target price for NOC?
Wall Street consensus target for NOC: $696.95 (+23.6% upside from the current price of $563.68). The analyst target range spans $603.00 (most bearish) to $815.00 (most bullish). Consensus recommendation: Buy. Note that analyst price targets typically reflect a 12-month forward horizon and are derived from a blend of DCF, comparable-company, and sum-of-the-parts analysis. A.L. Capital Advisory’s quantitative Strong Buy rating is produced independently — from DCF intrinsic value, five-factor model scores, and CVaR tail risk — and does not mechanically track Street consensus. When the two diverge, the divergence itself is informative: it can reflect differences in time horizon, valuation methodology, or the degree to which the current price already discounts the consensus case. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Monte Carlo Simulation Framework →
How does NOC score on Value, Quality, Momentum, Volatility, and Size?
NOC five-factor scores (A.L. Capital Advisory, 1–5 scale): Value 4.0/5 (above average) — measures current price versus DCF intrinsic range and trailing earnings multiples; Quality 3.0/5 (neutral) — captures profitability metrics including return on equity, net margin (ROE: 28.5%) and net margin (10.8%); Momentum 3.0/5 (neutral) — reflects recent price trajectory and earnings surprise consistency; Volatility 5.0/5 (strong) — inverse measure derived from beta, where lower historical volatility earns a higher score; Size 4.0/5 (above average) — market capitalisation rank (mega-cap $1T+ scores 5/5). Composite: 3.8/5. Factor scores above 4.0 signal a tailwind in that dimension; below 2.0 signals a material headwind. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Black-Litterman Model →
What is NOC's tail risk and CVaR?
The 95th-percentile Conditional Value at Risk (CVaR) for NOC on a one-month horizon is -21.3%. CVaR represents the expected average loss in the worst 5% of monthly outcomes — a more conservative tail risk measure than standard VaR, which only marks the loss threshold. Beta of -0.11 indicates below-market volatility. For reference, a diversified S&P 500 ETF carries a one-month CVaR of roughly -8% to -12% in normal market conditions; individual equity CVaR is higher due to idiosyncratic risk. At the portfolio level, what matters is the marginal CVaR contribution of each holding — not its standalone figure. The A.L. Capital Advisory Portfolio Health Check quantifies each position's marginal tail-risk contribution across your entire holdings. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: CVaR & Tail-Risk Methodology →
What is NOC's intrinsic value and DCF price target?
A.L. Capital Advisory's DCF model produces an intrinsic value range of $595 (bear case) to $859 (bull case) for Northrop Grumman Corporation (NOC). At $563.68, the midpoint margin of safety is +29% (positive = discount to intrinsic mid; negative = premium). The bear-to-bull spread reflects genuine sensitivity to the two dominant DCF inputs: the terminal growth rate and WACC. Terminal value typically accounts for 60-80% of total intrinsic value in most equity DCF models, which is why a range is more analytically sound than a point estimate. The central analytical question is not what the DCF outputs as a single number but which growth trajectory the current market price already discounts. All DCF analysis follows CFA Institute standards and is conducted by Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: DCF Valuation Framework →
What would trigger a rating upgrade or downgrade for NOC?
Upgrade trigger: Upgrade to Strong Buy on evidence of accelerating earnings surprise magnitude combined with improvement in the Value factor score — specifically if the current 17.7x P/E is supported by an upward revision to DCF terminal growth assumptions. Downgrade trigger: a sustained reversal in the Quality and Momentum factor scores for two or more consecutive quarters. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Investment Policy Statement Framework →
Does NOC consistently beat earnings estimates?
NOC has beaten consensus EPS estimates in 12% of tracked quarterly periods — indicating inconsistent delivery. The most recent reported quarter beat consensus by 1.3%. Below-average earnings consistency is a primary headwind to the rating and a key watch item in the quantitative model. Earnings surprise magnitude and direction are incorporated into the Momentum and Quality dimensions of the five-factor scoring model. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: DCF Valuation Framework →
How does NOC contribute to portfolio risk and diversification?
NOC carries a beta of -0.11 (low-volatility / defensive relative to the broad equity market). A beta above 1.0 means the position amplifies market moves in both directions at a typical portfolio weight. Strongest peer co-movement: LHX (0.64), RTX (0.53), GD (0.49). Holding NOC alongside these names in the same portfolio increases concentration risk. True portfolio risk is a function of the full covariance structure — a single stock's beta does not reveal its marginal contribution to portfolio tail loss. The A.L. Capital Advisory Portfolio Health Check quantifies concentration risk (Herfindahl-Hirschman Index), pairwise correlations, and marginal CVaR contribution across all your holdings. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: Ledoit-Wolf Covariance Framework →
What quantitative methodology does A.L. Capital Advisory use to analyse NOC?
A.L. Capital Advisory analyses Northrop Grumman Corporation (NOC) using a four-component quantitative framework grounded in CFA Institute standards. (1) DCF Valuation: projects free cash flows under bear and bull assumptions, discounts at WACC to produce an intrinsic value range with margin-of-safety calculation. (2) Five-Factor Scoring: each equity is scored 1–5 on Value, Quality, Momentum, Volatility, and Size. (3) CVaR Tail Risk: 95th-percentile Conditional Value at Risk from historical simulation of daily returns on a one-month horizon. (4) Earnings Surprise Analysis: quarterly beat rate and magnitude are incorporated into the Momentum and Quality factor scores. The current Strong Buy rating for NOC is the output of applying this complete framework to current data. Analysis by Anton Ladnyi, CFA (ex-Goldman Sachs, ex-J.P. Morgan) · A.L. Capital Advisory. Full methodology: DCF Valuation Framework → · CVaR & Tail-Risk Methodology →
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This analysis is produced using a systematic quantitative framework applied to market data and does not constitute investment advice. Prose commentary is AI-assisted and generated from structured quantitative inputs. All data and metrics are as of 2026-05-30 and are point-in-time estimates subject to revision without notice. CVaR figures are based on historical simulation and do not guarantee future outcomes. DCF ranges and upgrade/downgrade triggers are forward-looking statements based on current assumptions and may not materialise. Past performance does not guarantee future results. This analysis does not account for individual circumstances, tax position, or investment objectives — consult a qualified financial advisor before making investment decisions. This content is intended for informational purposes only and does not constitute regulated investment advice under MiFID II or FCA guidelines. This content is not intended for US persons or residents of jurisdictions where its distribution would be contrary to local law or regulation. This service is not directed at residents of Finland, Sweden, Norway, Denmark, Iceland, or Poland. The author may hold long or short positions in securities mentioned in this analysis. Nothing on this page represents a solicitation to buy or sell any security. A.L. Capital Advisory is an independent private advisory practice and is not affiliated with Northrop Grumman Corporation.
CFA Portfolio Advisory — NOC
Discuss this analysis, position sizing, or your full portfolio mandate with Anton Ladnyi, CFA.
