Since our previous article in August, Northrop Grumman's (NYSE:NOC) stock is down about another $37 per share to $263. The company now trades at a forward P/E of 14.7. That's the company's lowest forward P/E since the market's expectation of defense cuts around the 2010-2011 time period. Let's take a look at these risks more in-depth and how vulnerable NOC and other defense contractors would be to a 2020 slowdown in spending.

Defense Budget

Perhaps the biggest issue weighing on NOC (and other defense contractors) is the prospect of a shrinking defense budget. Trump started off this year by calling out the size of the defense budget on Twitter of $700B, a drop from last year's $716B. However, he later reversed course after a meeting with Secretary of Defense James Mattis and proposed a budget of $750B.

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