As the Trump administration begins reshaping the priorities of US defense spending, investors are seeking clarity on how contractors will fare under an era marked by heightened scrutiny and potential cuts.
Yet amid this uncertainty, Northrop Grumman is emerging as a favoured bet for long-term defence exposure, thanks to its alignment with enduring military needs and promising weapons programs.
On Tuesday, Morgan Stanley analyst Kristine Liwag upgraded her stance on the overall defense sector to “Attractive” from “In-line,” emphasizing that fears of sweeping cuts may be overblown.
She noted that even with the establishment of the Department of Government Efficiency (DOGE)—led by Elon Musk and tasked with rooting out waste—core defense spending is expected to continue rising.
Simultaneously, European demand for US weapons systems is forecast to grow as NATO nations increase their budgets in response to global security challenges.
Liwag retained her Buy rating on Northrop Grumman stock and lifted her price target to $625 from $580, calling it her top pick.
According to her analysis, the company’s wide-ranging portfolio, which includes uncrewed systems, fighter jets, missiles, and space assets, is uniquely positioned to benefit from both US and international defense trends.
Shares of the defence major have gone up around 13% since the start of the year.
Goldman Sachs also upgrades NOC, highlights stealth programs
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Northrop Grumman’s appeal has also caught the attention of other Wall Street firms.
Last Friday, Goldman Sachs analyst Noah Poponak upgraded the stock from Sell to Neutral, while raising the price target to $521 from $424.
He pointed specifically to the B-21 Raider stealth bomber and the Sentinel missile warning system as platforms with years of potential ahead.
“NOC owns the B-21 and Sentinel, which are still relatively early in their total life cycle, and should drive long-term growth,” Poponak wrote.
While Goldman acknowledged some risk tied to cost and margin pressures in these programs, the report noted that Northrop’s premium valuation—currently the highest among large-cap US defense firms—reflects confidence in the firm’s sustained performance and earnings visibility.
General Dynamics downgraded
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The outlook is less favorable for other defense companies such as General Dynamics.
Liwag downgraded the stock to Hold from Buy and reduced the price target from $315 to $305.
She cited exposure to business jets—a sector vulnerable to tariffs and weakening demand during economic downturns—as a key reason for concern.
According to FactSet data, 57% of analysts covering Northrop Grumman rate it a Buy, compared to just 46% for General Dynamics.
The average price target for Northrop sits at $555, further indicating that investor sentiment remains firmly in its favor as global defense priorities shift.
