Security and aerospace company Northrop Grumman (NYSE: NOC) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 9.6% year on year to $11.71 billion. On the other hand, the company’s full-year revenue guidance of $43.75 billion at the midpoint came in 1.1% below analysts’ estimates. Its GAAP profit of $9.99 per share was 43.5% above analysts’ consensus estimates.

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Company Overview

Responsible for the development of the first stealth bomber, Northrop Grumman (NYSE: NOC) specializes in providing aerospace, defense, and security solutions for various industry applications.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Northrop Grumman’s 2.7% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Northrop Grumman’s annualized revenue growth of 3.3% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

We can better understand the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Northrop Grumman’s backlog reached $95.68 billion in the latest quarter and averaged 6.1% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Northrop Grumman’s products and services but raises concerns about capacity constraints.

This quarter, Northrop Grumman reported year-on-year revenue growth of 9.6%, and its $11.71 billion of revenue exceeded Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.

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Operating Margin

Northrop Grumman has managed its cost base well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.6%.

Looking at the trend in its profitability, Northrop Grumman’s operating margin decreased by 5.1 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Northrop Grumman generated an operating margin profit margin of 10.9%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Northrop Grumman’s EPS grew at a decent 8.9% compounded annual growth rate over the last five years, higher than its 2.7% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Diving into the nuances of Northrop Grumman’s earnings can give us a better understanding of its performance. A five-year view shows that Northrop Grumman has repurchased its stock, shrinking its share count by 14.6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Northrop Grumman, its two-year annual EPS growth of 47.1% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q4, Northrop Grumman reported EPS of $9.99, up from $8.66 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Northrop Grumman’s full-year EPS of $29.13 to stay about the same.

Key Takeaways from Northrop Grumman’s Q4 Results

It was good to see Northrop Grumman beat analysts’ EPS expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance slightly missed. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $655.20 immediately after reporting.

Is Northrop Grumman an attractive investment opportunity at the current price? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).