Al Root

Northrop Grumman stock fell early Wednesday after a report that a new high-tech jet for the U.S. Navy might never happen.

Shares of the defense contractor were down 1.8% in premarket trading at $494.51, while S&P 500 and Dow Jones Industrial Average futures were up 0.1% and 0.2%, respectively.

The move came after Axios reported that the Trump administration would shelve the Navy's F/A-XX sixth-generation fighter jet program.

Northrop and the Defense Department didn't immediately respond to a request about the report.

Generations refer to the technology and capabilities of certain planes; the F-35 and F-22 are fifth-generation fighters. Russia and China have fifth-generation fighters, and China is believed to be developing a sixth-generation jet.

Earlier this year, Boeing scored a surprise win over Lockheed Martin, winning a contract to supply the Air Force's sixth-generation fighter jet, now called the F-47.

A decision about the Navy's sixth-generation was supposed to follow shortly after that March announcement, according to Reuters, but no decision ever came. The Navy contest was reportedly between Northrop and Boeing, with Wall Street believing that Boeing's Air Force win made it more likely the Navy would select Northrop, partly to diversify suppliers.

It's now possible that the Navy will get the Air Force version of the F-47, rather than its own plane.

The F-47 will eventually replace the F-22, of which the Air Force has about 190. Shortly after Boeing's win, Jefferies analyst Sheila Kahyaoglu wrote that Boeing's win was worth about $200 million in annual earnings. Using that as a guide, a similarly sized win for Northrop would be worth about $1.40 per share in annual earnings. That's worth about $28 a share based on the company's current valuation multiple, or about 6% of the recent stock price.

There is no reason for Northrop stock to drop 6% on the report. The plane might happen eventually, and there was, of course, no guarantee Northrop would win the contract.

Since Boeing won the Air Force contract, Northrop shares were up about 3%, while Lockheed shares were down slightly. Boeing stock was up more than 20%, but the shares typically trade based on developments in its commercial aerospace business. Investors have been feeling better about 737 MAX production lately.

Write to Al Root at allen.root@dowjones.com

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July 02, 2025 08:25 ET (12:25 GMT)

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