Northrop Grumman Corp.

Strong Q2 results; backlog hits record and book-to-bill well above target - Q2 awards/bookings: $20B net awards; book-to-bill 1.84x. - Backlog: up 17% YoY to $105B (record high). - Sales: $10.9B, +5% YoY and +10% sequential. - Context (good): management emphasized converting robust demand into orders and accelerating sales momentum in 2H.

Raised 2026 guidance (key forecast upgrades) - Sales (2026): raised to $44B midpoint (range $43.75B–$44.25B) = >5% organic growth. - Book-to-bill (2026): now expects ≥ 1.25x for the full year. - EPS (2026, mark-to-market adjusted): raised by +$1.20 to $28.60–$29.10 (effective tax rate targeted mid-14%). - Adjusted free cash flow (2026): $3.1B–$3.5B reaffirmed (includes ~$1.85B B-21 asset sale cash receipts, with timing shifts between this year/other program payments). - Capital expenditures: expects ~$1.85B CapEx in 2026; CapEx ~4.5% of sales in 2027–2028 (directionally refined later).

Segment performance: solid topline, but margins pressured by program cost/EAC adjustments (notably DS & Space) - Aeronautics (AS): strong—margins up; sales +13% (driven by B-21/Takamo/mature programs), margin ~10.3%. - Defense Systems (DS): sales up +2% organic, operating margin 7.5%, but Q2 was dragged by ~$68M unfavorable EAC on SAW (higher projected qualification/design costs). - DS margin excluding EAC impacts was ~11%, and management expects 2H margins >11% (sentinel/IBCS/weapons ramp). - Space: sales +4%, operating margin 8.6% with unfavorable EAC on GEM 63XL (higher estimated costs/materials). - Management expects the rest of Space to support 11%+ 2H margins, despite lowering full-year Space margin outlook. - Surprising/negative: even with strong bookings and growing backlog, margin volatility from development/estimate changes remains a key near-term swing factor.