GE vs. Northrop: Which Aerospace & Defense Stock Should You Bet On?

GE Aerospace GE and Northrop Grumman Corporation NOC are two familiar names operating in the aerospace and defense industry. As rivals, both companies are engaged in producing highly engineered aircraft components for commercial and military aircraft in the United States and internationally.

Both companies have been enjoying significant growth opportunities in the aerospace and defense space on account of the improving air traffic trend and the expansionary U.S. budgetary policy over the past couple of years. Let's take a closer look at their fundamentals, growth prospects and challenges.

The Case for GE Aerospace

GE Aerospace is benefiting from the higher utilization of engine platforms, driven by strong momentum and growth across commercial and defense aerospace sectors. Solid demand for LEAP, GEnx & GE9X engines and services, supported by growth in air traffic, fleet renewal and expansion activities, is driving the performance of the Commercial Engines & Services business.

In the first half of 2026, the company secured several major engine orders and service agreements. GE clinched orders from United Airlines and Delta Air Lines to deliver GEnx engines, while it received orders for LEAP engines from American Airlines and Copa Airlines. Copa Airlines selected up to 120 LEAP-1B engines to power its expanding Boeing 737 MAX fleet. It also entered into a long-term materials agreement to support Ryanair's fleet of about 2,000 CFM56 and LEAP engines.

The company is also making progress under its FLIGHT DECK lean model, including supplier improvements that contributed to Commercial Engines & Services business' revenues. In the second quarter of 2026, the segment's engine deliveries increased 26% from the prior-year quarter, indicating better throughput as the company works through customer demand. The Commercial Engines & Services segment's revenues and orders jumped 27% and 18%, respectively, on a year-over-year basis in the second quarter.

Solid demand for the company's propulsion & additive technologies, critical aircraft systems and aftermarket services in the defense sector is boosting the Defense & Propulsion Technologies business' performance. GE received a contract from Turkish Aerospace Industries ("TAI") to continue integrating its F404 engine into Türkiye's Hurjet jet trainer. It also clinched a $1.4 billion deal for T408 engines to support the U.S. Marine Corps' CH-53K helicopter fleet. In second-quarter 2026, the Defense & Propulsion Technologies segment's revenues increased 16% year over year and orders grew 12%.

The company's shareholder-friendly policies also add to its appeal. In the first six months of 2026, it paid dividends of $873 million, up 26.9% year over year, to its shareholders. It also raised its dividend by 30.6% to 36 cents per share in February 2026. In the same period, the company repurchased shares for $4.2 billion.

Story Continues

The Case for Northrop Grumman

Northrop is expected to continue generating steady organic growth in 2026 and beyond as it continues to win new awards and thereby convert the robust backlog, which was $104.7 billion as of June 30, 2026, into solid sales growth. Such a robust backlog count is backed by increasing demand for the company's defense products and rising global defense budget support, which in turn should boost Northrop's revenue-generating prospects substantially.

The current U.S. government's inclination toward strengthening the nation's defense system should act as a growth catalyst for defense contractors like Northrop. Considering that sales from Northrop to the U.S. government comprised 84% of its total sales in 2025, solid funding provisions from the administration are expected to lead to a solid inflow of contracts for Northrop.

Foreign military sales also serve as a key growth catalyst for Northrop. The company's international sales totaled $1.54 billion in the second quarter of 2026, comprising 14% of total sales. Region-wise, Northrop is witnessing significant opportunities for its Integrated Battle Command System (IBCS) and other weapons in Europe. Moreover, the long-standing conflicts in different parts of the Middle East have also been fueling demand for modern defense products.

NOC also remains committed to rewarding its shareholders through dividends and buybacks. In the first six months of 2026, it paid dividends of $684 million, up 7.9% year over year, to its shareholders. It also raised its dividend by 6.9% to $2.47 per share in May 2026. In the same period, the company repurchased shares for $68 million.

Despite the positives, NOC's highly leveraged balance sheet remains concerning. Exiting the second quarter, Northrop's long-term debt was high at $14.4 billion. Considering the high debt level, its cash and cash equivalents of $2.3 billion do not look impressive.

Price PerformanceZacks Investment Research

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In the past six months, GE Aerospace shares have risen 15%, while Northrop stock has lost 21.9%.

The Zacks Consensus Estimate for GE & NOCZacks Investment Research

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The Zacks Consensus Estimate for GE's 2026 sales and earnings per share (EPS) implies year-over-year growth of 19.7% and 23.4%, respectively. EPS estimates for both 2026 and 2027 have increased over the past 60 days.Zacks Investment Research

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The Zacks Consensus Estimate for Northrop's 2026 sales and EPS implies year-over-year growth of 4.9% and 9.5%, respectively. EPS estimates for both 2026 and 2027 have been raised over the past 60 days.

Valuation of GE & NorthropZacks Investment Research

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Northrop is trading at a forward 12-month price-to-earnings ratio of 17.99X, close to its median of 18.74X over the last three years. GE's forward earnings multiple sits at 41.88X, higher than its median of 37.01X over the same time frame.

Final Take

GE Aerospace's strong momentum in the commercial and defense aerospace markets, driven by solid build rates, wide-body aircraft demand and a robust defense budget, bodes well for growth. Given the strength across most of its served markets, GE has built a sound liquidity position that supports its shareholder-friendly policies.

In contrast, Northrop's strength in the defense aerospace market, along with its robust pipeline of projects, favors well for its growth. Its shareholder-friendly policies add to its appeal. However, this has been marred by the supply-chain challenges and high debt level, which might affect its performance.

Despite its steeper valuation, GE holds robust prospects due to strong estimates, stock price appreciation and better prospects for sales and profit growth. Given these factors, GE seems a better pick for investors than Northrop currently. While GE carries a Zacks Rank #2 (Buy), Northrop currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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