Northrop Grumman reported better-than-expected fourth-quarter earnings. Shares dropped, however. Expectations might have been too high.

Tuesday morning, the defense contractor reported fourth-quarter earnings per share of $7.23 from sales of $11.7 billion. Wall Street was looking for EPS of $6.98 from sales of $11.6 billion, according to FactSet. A year ago, Northrop reported EPS of $6.39 from sales of $10.7 billion. The backlog grew to a record $95.7 billion, with more orders than sales during the quarter.

Shares were down 2% at $648 in premarket trading, while S&P 500 futures were up 0.2% and Dow Jones Industrial Average futures were down 0.2%.

Starting points help explain the reaction. Northrop stock has been strong, boosted by higher growth from higher defense spending. Coming into Tuesday trading, Northrop shares were up 33% over the past 12 months. Gains left Northrop stock trading for about 23 times earnings estimated for the coming 12 months, up from about 18 times a year ago.

The company’s full-year outlook also landed a bit short of the Street consensus. For 2026, Northrop expects EPS of between $27.40 and $27.90. Analysis project $28.91. Sales are expected to land between $43.5 billion and $44 billion, up almost 5%. Wall Street, however, projects sales of $44.3 billion.

The operating profit guidance looks solid, though. Northrop expects about $4.9 billion, just ahead of the $4.8 billion analysts currently project.

Overall, the quarter looks OK, and the trends, such as higher sales growth, remain. Northrop grew sales closer to 3% a year between 2020 and 2025.

Things are better for the company these days. Some of that is reflected in the stock price.