Key Insights

• Northrop Grumman's Annual General Meeting to take place on 14th of May

• Total pay for CEO Kathy Warden includes US$1.73m salary

• Total compensation is 68% above industry average

• Northrop Grumman's EPS declined by 19% over the past three years while total shareholder return over the past three years was 35%

The share price of Northrop Grumman Corporation (NYSE:NOC) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. Some of these issues will occupy shareholders' minds as the AGM rolls around on 14th of May. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

See our latest analysis for Northrop Grumman

How Does Total Compensation For Kathy Warden Compare With Other Companies In The Industry?

Our data indicates that Northrop Grumman Corporation has a market capitalization of US$70b, and total annual CEO compensation was reported as US$25m for the year to December 2023. We note that's an increase of 20% above last year. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.7m.

For comparison, other companies in the American Aerospace & Defense industry with market capitalizations above US$8.0b, reported a median total CEO compensation of US$15m. This suggests that Kathy Warden is paid more than the median for the industry. What's more, Kathy Warden holds US$92m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.

Talking in terms of the industry, salary represented approximately 24% of total compensation out of all the companies we analyzed, while other remuneration made up 76% of the pie. It's interesting to note that Northrop Grumman allocates a smaller portion of compensation to salary in comparison to the broader industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at Northrop Grumman Corporation's Growth Numbers

Northrop Grumman Corporation has reduced its earnings per share by 19% a year over the last three years. Its revenue is up 8.1% over the last year.

The decline in EPS is a bit concerning. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has Northrop Grumman Corporation Been A Good Investment?

Boasting a total shareholder return of 35% over three years, Northrop Grumman Corporation has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Despite the strong returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about the stock keeping up its current momentum. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

While CEO pay is an important factor to be aware of, there are other areas that investors should be mindful of as well. We've identified 3 warning signs for Northrop Grumman that investors should be aware of in a dynamic business environment.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.