RBC cuts Northrop Grumman rating on slower growth, cautious defense outlook

RBC Capital downgraded Northrop Grumman to Sector Perform with a $525 price target, implying 8.9% upside. The firm cited limited growth outlook and valuation risks due to competitive pressures and defense spending concerns.

The Pentagon's continued spending supports four defense stocks: Lockheed Martin (LMT), General Dynamics (GD), RTX, and Northrop Grumman (NOC). LMT reported $20.06B Q2 revenue (+10.5% YoY) and $7.94 EPS, with a $3.45 quarterly dividend. GD saw $14.1B Q2 revenue (+8.1%) and $4.24 EPS, with a $1.59 quarterly dividend. RTX had $289B backlog, $0.73 quarterly dividend, and raised 2026 free cash flow guidance. NOC reported $20B Q2 awards, $7.68 EPS, and $2.47 quarterly dividend.

RBC Capital downgraded Northrop Grumman (NOC) to Sector Perform, lowering its price target to $525 from $640. The firm expects 6% top-line growth for 2026-2028, in line with peers, and sees limited upside due to slower budget growth and reduced international sales exposure. NOC's stock is near its 52-week low, down 31% over six months, but is considered undervalued with a P/E ratio of 15.3 and a strong dividend history.

The U.S. Department of Defense awarded Boeing a $20 billion contract for the F/A-XX, the Navy’s next-generation stealth fighter. The program could be worth hundreds of billions over its lifetime. Boeing beat Northrop Grumman, which saw its shares fall 3.5%. Boeing shares rose 2%. The F/A-XX is set to replace current fighters and enter service around 2035, with production capacity cited as a key factor in Boeing's win.

The U.S. Navy awarded Boeing a $20 billion contract for the F/A-XX fighter, beating Northrop Grumman. Boeing's stock rose 2% after-hours but closed down 0.85%, while Northrop fell 4.2%. The contract covers development and test aircraft, with production details undecided. Boeing's defense segment reported a $15 million loss in Q2, and Northrop's backlog hit a record $104.69 billion.

Northrop Grumman (NOC) stock is down 5.3% this week after losing a U.S. Navy contract to Boeing (BA). Bank of America remains bullish, citing Northrop's other major defense programs. NOC is down 15% year-to-date. Boeing's win strengthens its military aviation position. Retail sentiment on Stocktwits is bearish.