Northrop Grumman Corporation (NOC) SEC Filings & Earnings Calls

Operating margin rate declined 50 bps due to lower FAS/CAS operating adjustment and prior year favorable EAC adjustment.

“Operating margin rate declined to 11.4 percent from 11.9 percent principally due to the decrease in the FAS/CAS operating adjustment.” · word for word

Segment operating margin rate decreased 20 bps due to prior year $68M favorable EAC adjustment in Mission Systems.

“Segment operating margin rate decreased from 12.3 percent in the third quarter of 2025 principally due to a prior year $68 million favorable EAC adjustment in the restricted advanced microelectronics portfolio at Mission Systems.”

B-21 Program Loss Exposure

“We have previously recognized and disclosed cumulative losses of approximately $2.0 billion on the LRIP phase of the program.” · word for word

Sentinel Program Restructure Risk

“If our estimated cost to complete the restructured EMD effort or our achievement of future contract incentives is more or less favorable than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.” · word for word

Government Funding Uncertainty

“Government operations under an extended CR could have adverse impacts on our programs and new starts, in particular.” · word for word

Supply Chain and Inflation Pressure

“These macroeconomic factors have contributed, and could continue to contribute, to increased costs, delays, disruptions and other performance challenges.” · word for word

CEO retention risk mitigated by long-term equity grant

“award subject to continued service through performance period ending December 31, 2031”

Operating margin decline due to prior year gain and lower segment income, particularly Defense Systems and Space Systems.

“Operating margin rate declined to 10.1 percent from 13.8 percent; Defense Systems operating income down 38% YoY; Space Systems down 16% YoY”

Higher capital expenditures may pressure free cash flow in the near term.

“Capital expenditures increased 31% to $302 million”

B-21 program loss risk

“We have previously recognized and disclosed cumulative losses of approximately $2.0 billion on the LRIP phase of the program.” · word for word

Supply chain and inflation risk

“These macroeconomic factors have contributed, and could continue to contribute, to increased costs, delays, disruptions and other performance challenges.” · word for word

Tariff risk

“We are continuing to monitor the impact on our business, suppliers and customers, but do not believe that the tariffs, including the IEEPA tariffs, have had or will have a material adverse effect on our business.” · word for word

B-21 program loss risk

“If our estimated cost to complete the aircraft changes, or if our assumptions regarding contract performance, quantities, or supplier negotiations are resolved more or less favorably than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.” · word for word

Sentinel program restructuring risk

“If our estimated cost to complete the restructured EMD effort or our expectations for achieving contract incentives are more or less favorable than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.” · word for word

Government shutdown impact

“After the DHS continuing resolution expired, the federal government entered a partial shutdown, which remains in effect.” · word for word

Tariff uncertainty

“We are continuing to monitor the impact on our business, suppliers and customers, but do not believe that the tariffs, including the IEEPA tariffs, have had or will have a material adverse effect on our business.” · word for word

Negative free cash flow in Q1 due to working capital timing; typical for first half.

“Free cash flow was negative $1.8 billion, reflecting increases in trade working capital consistent with historical timing.”

Space Systems sales declined due to wind-down of NGI program.

“Space Systems sales down 3% due to wind-down of work on the Next Generation Interceptor (NGI) program.”

Program Execution Risk

“The proponent points to a $477 million pre-tax loss on the B-21 Raider stealth bomber program due to higher-than-anticipated manufacturing and material costs.”

Competitive Pressure

“NOC lost the bid for the Next Generation Interceptor (NGI) anti-missile contract (an estimated $17 billion program) to Lockheed Martin.” · word for word

Space Systems segment sales declined 8% in 2025, indicating potential headwinds in that business.

“Space Systems full year sales $10,771M vs $11,731M in 2024, an 8% decline.”

Full year segment operating margin declined 70 bps to 10.4%, suggesting some margin pressure.

“Segment operating margin rate 10.4% for full year 2025 vs 11.1% in 2024, a 70 bps decline.”

U.S. government funding dependency

“We depend heavily on a single customer, the U.S. government, for a substantial portion of our business.” · word for word

Fixed-price contract risk

“Fixed-price contracts tend to have more financial risk than cost-type contracts, including as a result of inflationary pressures, labor rates and shortages, challenges in estimating contract revenues and costs, and supplier challenges.” · word for word

Supply chain disruption

“We have experienced challenges with access to certain raw materials due to macroeconomic factors and several global events such as inflation, geopolitical conflicts and microelectronics shortages.” · word for word

CFO transition risk; new CFO has no defense industry experience, coming from financial services and biotech.

“John Greene's prior roles at Discover Financial, Bioverativ, Willis Group, HSBC, and GE; no defense sector experience.”