Grumman between armaments boom and ambitious valuation
After lagging behind their European sector colleagues in 2025, the picture has changed this year. American defense stocks are currently unstoppable, and right in the middle of it all: Northrop Grumman.
As unfortunately announced 4 weeks ago.
It is above all the rhetoric and unpredictable behavior of US President Donald Trumpthat has driven the share price (USD 751.09; US6668071029) of Northrop Grumman have risen by over 30% since the beginning of January. Even before the attack on Iran, Trump emphasized that he wanted to increase US military spending to USD 1.5 trillion, around 50% more than the amount budgeted for 2026.
In addition, the "Golden Dome" missile defense system was presented as a central project that is intended to provide a multi-layered missile defense shield over the USA. Although the funds have not yet been fully released, there is a good chance that additional demand for integrated sensor and defense systems will arise in the long term. Northrop's core technologies in the areas of space, hypersonic tracking and orbital sensors play a central role in this.
No performance over the next two years.
The B-21 Raider stealth bomber, which is considered a strategic component of the US Air Force, remains the centerpiece of the growth perspective. It is due to enter service from the mid to late 2020s and will ensure the strategic effectiveness of the USA for decades to come. According to the company, the test program is now progressing better than anticipated. Northrop is currently investing several billion dollars in capacity expansion in order to increase the production rate and realize economies of scale.
In the short term, the high start-up costs are weighing on profitability: adjusted EPS rose by just 1% to USD 26.34 in 2025. In the current financial year, CEO Kathy Warden expects an increase to between 27.40 and 27.90 US dollars. At the same time, sales are expected to increase to USD 43.5 to 44 billion (2025: USD 41.95 billion). The extensive multi-year order backlog of over USD 95.7 billion (as at December 31, 2025) provides planning security.
$LMT (+0,57%) I am STILL invested here
In the meantime, the valuation of the S&P 500-stock has risen to 27 times the earnings expected for 2026 (P/E ratio); just over twelve months ago, the forward P/E ratio was 15. This is comparable to Rheinmetall and Renkwhich, however, are likely to show significantly higher earnings growth in the coming years.
For investors interested in armaments, we therefore see a better risk/reward ratio for the German stocks and realize the profit of around 50% (including dividends) since the initial entry.
Sell Northrop Grumman.
