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Today's Featured Article
These 3 Defense Giants Beat Q1 Estimates—So Why Did Their Stocks Still Fall?Written by Jessica Mitacek. Originally 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 nears its ninth week, estimates pegged the cost at roughly $1 billion to $2 billion per day before the ceasefire announcement. While U.S. taxpayers are footing the bill, a small group of companies has seen heightened demand for their defense equipment. 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 like GE Aerospace (NYSE: GE), Northrop Grumman (NYSE: NOC), and RTX (NYSE: RTX).
For investors seeking insight into potential upside—and into how a quick, peaceful end to the conflict could affect prices—here are some clues. GE Aerospace: Double-Beat Included a 25% Increase in RevenueGE Aerospace supplies propulsion systems to a range of clients, including defense customers. The U.S. military is a major customer and has awarded the company numerous multi-billion-dollar contracts. Recent agreements 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. Those deals, already on GE Aerospace’s books prior to the start of the Iran war, contributed to Q1 revenue. When the company reported on Tuesday, April 21, it announced revenue of $11.61 billion, beating analyst estimates and marking a 24.6% year-over-year (YOY) increase. Earnings per share (EPS) came in at $1.86, above the consensus of $1.81, marking the company’s 14th consecutive beat. In his earnings call comments, CEO Larry Culp opened by addressing the Middle East conflict and said the “dynamic geopolitical environment our industry is navigating” contributed to 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 climbed 43% YOY. Nonetheless, GE shares slid more than 5% on the day after the market reacted negatively to management not raising full-year guidance. Valuation concerns also weighed: the stock's forward price-to-earnings (P/E) ratio is around 37x, which 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 $4.5 billion production agreement 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 production stages at Plant 42. While not yet operational, the program's development and early production work contributed to Northrop Grumman’s Q1 revenue. On Tuesday, April 21, the company reported Q1 EPS of $6.14, beating analyst expectations of $6.03. Quarterly revenue of $9.88 billion also surpassed estimates, a 4.4% YOY increase. The beat marked Northrop Grumman’s 14th 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 highlighted rising demand for the company’s offerings and noted 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 (YTD) gain, sold off after the Q1 release, with shares sliding nearly 7% when investors reacted to management reaffirming—rather than raising—full-year guidance. RTX: Punished After a Double BeatRTX, created by the 2020 merger of Raytheon and United Technologies, also impressed on Tuesday, April 21, with Q1 EPS of $1.78, above the consensus estimate of $1.52 and up 21% YOY. Meanwhile, quarterly revenue of $22.08 billion was 8.7% higher YOY and exceeded analyst expectations of $21.38 billion. Notably, the company has beaten earnings estimates every quarter since Q4 2016. Adjusted sales came in at $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 on the earnings call, after acknowledging the ongoing 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.” Still, RTX sold off on Tuesday, with shares falling more than 4% and pushing the stock into the red year-to-date. How Much Upside Can Defense Contractors Still Deliver?Despite Tuesday’s market reactions, all three defense contractors remain favored by analysts and each carries a Moderate Buy rating. Consensus one-year price targets imply GE has upside potential of more than 27%, NOC more than 22%, and RTX more than 12%. A near-term resolution to the Iran war could dampen investor sentiment. However, over the longer term, defense companies should continue to generate revenue from government contracts. That expectation is reflected in earnings growth forecasts: GE Aerospace's EPS is expected to grow more than 16% over the next year, Northrop Grumman's nearly 8%, and RTX’s about 10%. For investors considering the post-earnings selloff as an entry point, NOC and RTX are trading at more attractive forward P/E multiples—around 21 and 28, respectively—than GE. |
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