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These 3 Defense Giants Beat Q1 Estimates—So Why Did Their Stocks Still Fall?Written by Jessica Mitacek. First Published: 4/22/2026. 
Key Points
- Defense contractors saw strong earnings growth and rising demand tied to the Iran war, but stocks fell as investors focused on guidance and valuations.
- Despite post-earnings selloffs, GE Aerospace, Northrop Grumman, and RTX continue to benefit from long-term government contracts and growing defense spending, supporting steady revenue and earnings outlooks.
- Analysts still see upside in the sector, but a resolution to the conflict could weigh on sentiment, making current pullbacks a potential entry point for long-term investors.
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As the Iran conflict neared its ninth week, estimates put the cost of the fighting at roughly $1 billion to $2 billion per day prior to the ceasefire announcement. While U.S. taxpayers have been footing the bill, a select group of companies has seen heightened demand for weapons and defense systems. This week, aerospace and defense contractors began reporting Q1 2026 earnings. With the latest bout of geopolitical unrest in the Middle East having started on Feb. 28, the conflict has affected the top and bottom lines of companies such as GE Aerospace (NYSE: GE), Northrop Grumman (NYSE: NOC), and RTX (NYSE: RTX).
For investors seeking insight into how much upside—if any—remains for these stocks, and how a swift, peaceful resolution to the conflict could affect their prices, here are some clues. GE Aerospace: Double-Beat Included a 25% Increase in RevenueGE Aerospace supplies propulsion systems to a wide range of customers, including the U.S. military, and has secured numerous multi-billion-dollar contracts. Recent awards include a $5 billion contract for F110 engines in 2025, a $1.4 billion contract for CH-53K helicopter engines in January 2026, and a $14.16 million, four-year U.S. Air Force contract for fuel control systems that runs through June 2029. Although those deals were largely in place before the Iran conflict began, they contributed to Q1 revenue. On Tuesday, April 21, GE reported revenue of $11.61 billion, beating analyst estimates and representing a 24.6% year-over-year increase. Earnings per share (EPS) were $1.86, above the consensus of $1.81 and marking the company’s 14th consecutive beat. In his earnings call comments, CEO Larry Culp said the “dynamic geopolitical environment our industry is navigating” helped drive an 87% YOY increase in orders. Culp added that operating profit rose 18% YOY, EPS increased 25% YOY, free cash flow was up 14% YOY, and total engine deliveries rose 43% YOY. Still, GE shares slid more than 5% that day after management declined to raise full-year guidance. Valuation concerns also weighed on the stock—the forward price-to-earnings (P/E) ratio sits near 37x, which likely prompted some profit-taking following the Q1 results. Northrop Grumman: Top- and Bottom-Line Beats With B-21 Orders Nearing DeliveryNorthrop Grumman is building the B-21 Raider—a nuclear-capable, subsonic stealth strategic bomber—under a multibillion-dollar production deal with the U.S. Air Force. As of April 2026, two B-21 Raiders are undergoing flight testing at Edwards Air Force Base, with additional aircraft in various stages of production at Plant 42. While the bomber has yet to be battle-tested, production and development work contributed to Northrop Grumman’s Q1 results. On Tuesday, April 21, the company reported Q1 EPS of $6.14, topping expectations of $6.03. Quarterly revenue of $9.88 billion also beat estimates, a 4.4% YOY increase. The result marked Northrop Grumman’s 14th earnings beat in the last 15 quarters. “As we are seeing in recent military operations, many of our systems are playing a critical role in successfully executing the mission,” CEO Kathy Warden said in her earnings call comments. Warden noted rising demand and added that “in the last two years, [Northrop Grumman has] opened over 20 new facilities and added more than 2 million square feet of manufacturing space across the United States.” The stock, which has posted roughly a 3% year-to-date gain, fell nearly 7% after the company reaffirmed rather than raised full-year guidance. RTX: Punished After a Double BeatRTX, formed by the 2020 merger of Raytheon and United Technologies, also delivered strong results on Tuesday, April 21. Q1 EPS of $1.78 exceeded the consensus of $1.52, a 21% YOY gain. Quarterly revenue of $22.08 billion was 8.7% higher YOY and topped analyst expectations of $21.38 billion. Notably, the company has beaten earnings estimates every quarter since Q4 2016. Adjusted sales totaled $22.1 billion, and management raised full-year sales and EPS guidance while maintaining free cash flow guidance. “Our backlog is a record $271 billion, up 25% year-over-year, with strong commercial and defense awards in the quarter,” CEO Chris Calio said in his earnings call comments, acknowledging the situation in Iran. “On the defense side of the business, we saw significant awards across all three segments, highlighting the strength of our product offerings. At Pratt, the military business was awarded over $3 billion for F-135 Lot 19 production.” Despite the beats, RTX sold off on Tuesday, with shares falling more than 4%, pushing the stock into negative territory year-to-date. How Much Upside Can Defense Contractors Still Deliver?Despite the market’s negative reactions to the reports, analysts remain generally positive on all three companies, each carrying a Moderate Buy consensus. One-year price targets suggest potential upside of more than 27% for GE (GE forecast), more than 22% for NOC (NOC forecast), and more than 12% for RTX (RTX forecast). A near-term resolution to the Iran conflict could dampen investor sentiment and slow order momentum. Over the longer term, however, these companies benefit from recurring government contracts. That is reflected in earnings growth expectations: GE Aerospace’s EPS is forecast to grow more than 16% over the next year, Northrop Grumman’s by nearly 8%, and RTX’s by about 10%. For investors considering the post-earnings pullbacks as entry points, NOC and RTX currently trade at more attractive forward P/E multiples—roughly 21 and 28, respectively—compared with GE’s higher multiple. |
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