Northrop Grumman updates executive compensation, director departs

FALLS CHURCH, VA— Northrop Grumman Corporation (NYSE:NOC), a leading global security company with $41.03 billion in annual revenue and a market capitalization of $62.85 billion, announced changes to its executive compensation structure and the departure of a board member in a recent SEC filing. According to InvestingPro, the company maintains a strong financial position with a healthy gross profit margin of 20.38% and has consistently raised its dividend for 21 consecutive years.

The company’s Compensation and Human Capital Committee, alongside the Board of Directors, approved the 2025 compensation-related actions for its named executive officers on Monday. The new compensation plan includes goals under the 2006 Annual Incentive Plan and Incentive Compensation Plan, which was amended and restated effective January 1, 2024. These changes come as the company demonstrates solid financial performance, with a return on invested capital of 14% and an impressive Altman Z-Score of 3.7, indicating strong financial health. For deeper insights into Northrop Grumman’s financial metrics and performance indicators, investors can access comprehensive analysis through InvestingPro, which offers exclusive access to over 30 key financial metrics and professional-grade analysis.

The revised incentive compensation plan focuses on several financial metrics, such as cash flow from operations before discretionary pension funding, which carries a 35% weighting, and segment operating income growth, also at 35%. Adjusted operating margin rate is weighted at 20%, while non-financial metrics—Inclusion and Belonging, Environmental Sustainability, Quality, and Customer Satisfaction—make up the remaining 10%.

Additionally, the company has awarded Restricted Performance Stock Rights (RPSR) for the 2025-2027 performance period with metrics based on cumulative free cash flow, return on invested capital, and relative total shareholder return, each accounting for a third of the evaluation. Restricted Stock Rights (RSR) that will vest on February 18, 2028, were also awarded. Notably, no stock options were granted, consistent with the company’s practice in previous years.

The Board also approved amendments to the Severance Plan for Elected and Appointed Officers. The amendments include a reduction in the severance timeframe from 18 months to 12 months for most executive officers, excluding the Chief Executive Officer. Additionally, the plan now allows the company discretion in determining the applicable individual performance factor for an officer’s pro-rated bonus.

In another significant development, Graham Robinson has decided not to seek re-election at the 2025 Annual Meeting of Shareholders, scheduled for later this year. Robinson will continue to serve on the Board until the Annual Meeting.

These changes, based on the filing from February 19, 2025, underscore Northrop Grumman’s ongoing adjustments to its executive compensation strategy and its board composition. The stock currently trades near its 52-week low of $418.60, with InvestingPro’s Fair Value analysis suggesting the stock may be undervalued. The company’s low volatility profile (Beta: 0.35) and consistent dividend payments make it an interesting consideration for value-focused investors.

Adjusted operating margin rate excludes certain items such as net pension, purchased intangible amortization, and other acquisition and divestiture-related items, as well as unforeseen macroeconomic pressures and plan overlays.

The information reported is based on the company’s recent SEC filing.

In other recent news, Northrop Grumman Corporation announced a quarterly dividend of $2.06 per share, payable on March 19, 2025, to shareholders of record as of March 3, 2025. This announcement underscores the company’s ongoing commitment to shareholder value and financial stability. In another development, Northrop Grumman secured two significant defense contracts valued at a combined $1.4 billion. These contracts focus on enhancing air and missile defense systems for the U.S. Army and Poland, utilizing advanced technologies like artificial intelligence and model-based systems engineering.

The contracts include a $481 million agreement for software development of the Integrated Battle Command System (IBCS) and an $899.6 million contract for implementing IBCS as the unified command and control system for Poland’s defense programs. Additionally, there are reports of potential defense budget cuts by the U.S. government, which could impact companies like Northrop Grumman that rely heavily on government contracts. President Trump has also expressed interest in discussing defense spending reductions with Russia and China, indicating a possible shift in U.S. defense policy. These recent developments are crucial for investors to monitor as they could influence Northrop Grumman’s future revenue streams and financial outlook.

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