Shares of Northrop Grumman Corp (NYSE:NOC) remained under pressure in early trading on Wednesday, despite the company reporting upbeat first-quarter results.

The company's results proved better than expected. Investors remain disappointed by the "lack of a formal B-21 contract renegotiation," which drove the stock down around 7% on Tuesday, according to BTIG.

The Northrop Grumman Analyst: Analyst Andre Madrid reiterated a Buy rating and price target of $815.

The Northrop Grumman Thesis: The company and the Air Force inked an agreement to increase the annual production rate of the B-21 (an advanced, sixth-generation nuclear-capable stealth bomber) by 25%, Madrid said in the note.

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The higher production is planned to be supported by $4.5 billion from last year’s reconciliation bill and $2.5 billion in company-funded investment for new facilities, the analyst stated.

This drives Northrop Grumman's 2026 capital expenditure higher by $200 million. The remainder will be spread from 2027 through 2029, he added.

Despite the higher capex, the company did not update its free cash flow targets for 2027 and 2028. "While incremental capex will weigh on FCF, NOC’s ability to hold its 2026 FCF outlook despite the $200mn increase is an encouraging sign of underlying cash generation power," the analyst pointed out.

B-21 currently represents around 10% of the company's total revenues and management expects this to increase over the next several years "as the accelerated production rate takes hold," Madrid said. He added that management expects program ROIC (return on invested capital) to be "meaningfully" higher than the cost of capital over the life of the program.

"Beyond B-21, the broader setup remains compelling: accelerating Sentinel growth, a robust international pipeline, strong missile defense and munitions demand, and several large contract opportunities on the horizon (F/A XX, Golden Dome, CCA) that could drive meaningful upside to current estimates," the analyst further wrote.

NOC Price Action: Shares of Northrop Grumman had declined by 1.98% to $599.00 at the time of publication on Wednesday.

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