Northrop Grumman Outperforms Lockheed Martin: A Comparison

Northrop Grumman may continue to outperform Lockheed Martin, with a focus on the company's performance and market positioning. The article discusses Northrop Grumman's potential advantages over Lockheed Martin, including its diversified portfolio and strong defense contracts. It also highlights Northrop Grumman's recent success in various industries, such as space exploration and cybersecurity. The author concludes that Northrop Grumman may be a better investment option for those looking to capitalize on the defense industry's growth.

Northrop Grumman Corporation (NYSE: NOC) has shown remarkable resilience and growth, positioning itself as a strong contender in the defense industry. Recent financial performance and strategic developments suggest that Northrop Grumman may continue to outperform its arch-rival Lockheed Martin (LMT).

In the first half of 2025, Northrop Grumman reported a 25% increase in stock price, while Lockheed Martin experienced a 12% decline [1]. This divergence can be attributed to several factors, including Northrop Grumman's diversified portfolio and robust defense contracts.

Northrop Grumman's Q2 earnings report highlighted solid fundamentals, with total sales of $10.351 billion, up 1.30% year-over-year (YoY), and an impressive organic growth rate of 2% [1]. The company's defense systems and mission systems segments showed particularly strong performance, with sales increases of 9% and 14%, respectively. These segments benefited from higher sales volumes and favorable EAC adjustments, indicating strong cost control and efficiency.

However, the company's space systems segment faced challenges, with a 12% decline in sales due to wind-downs in restricted space and NGI programs [1]. Despite this, Northrop Grumman's overall operating margin expanded by 10 basis points, demonstrating a disciplined approach to cost management.

Northrop Grumman's forward P/E ratio has recently soared to 22.97, nearing three-year highs, suggesting potential overvaluation [1]. However, compared to the Industrials sector's GAAP forward P/E of 23.03, Northrop Grumman is trading at a 0.26% discount. This relative valuation makes the stock attractive, despite the elevated forward P/E ratio.

In addition to its strong financial performance, Northrop Grumman has secured significant contracts. The company was recently awarded a $99.6 million contract by the U.S. Naval Information Warfare Center (NIWC) Pacific to develop the next-generation Relay Ground Station-Asia (RGS-A) [2]. This contract underscores Northrop Grumman's ability to deliver mission-critical capabilities and highlights its role in the defense industry's growth.

Looking ahead, Northrop Grumman's B-21 program and the Golden Dome project hold significant potential, which could further drive growth and outperform Lockheed Martin. Despite near-term challenges, Northrop Grumman's robust fundamentals, diversified portfolio, and strong defense contracts position it as a promising investment option for those seeking exposure to the defense industry's growth.

References:
[1] https://seekingalpha.com/article/4812351-northrop-grumman-may-continue-to-outperform-lockheed-martin
[2] https://news.northropgrumman.com/milsatcom/northrop-grumman-to-develop-next-generation-relay-ground-station-for-us-naval-information-warfare-center-pacific