NOC
Northrop Grumman Corp.’s NOC, business unit, Northrop Grumman Systems Corp., recently secured a contract involving its E-2 Hawkeye aircraft. The award has been provided by the Naval Supply Systems Command Weapon Systems Support, Philadelphia, PA. Details of the Deal Valued at $119.6 million, the contract is estimated to be completed by December 2025. Per terms of the deal, Northrop will provide long-term, requirements contract for the repair of 17 weapon replaceable assemblies and shop replaceable assemblies to support the E-2 Hawkeye jets.
Majority of the work related to this deal will be carried out in Syracuse, NY.
What’s Favoring Northrop?
Over the past decade, a rapid rise in global terrorism and adverse geopolitical situations across borders have boosted the demand for defense products. With combat aircraft constituting a major portion of this portfolio, prominent defense aircraft manufacturers like Northrop witness a solid inflow of orders. The latest contract win is a bright example of that.
To this end, it is imperative to mention that Northrop’s all-weather E-2 Hawkeye airborne early warning and battle management (AEW&BM) aircraft has been serving as the "eyes" of the U.S. Navy fleet for more than 30 years. The E-2D Advanced Hawkeye is the next-generation aircraft in this family of jets, which comes with a two-generation leap in radar sensor capability and a robust network-enabled capability.
On the other hand, the E-2C Hawkeye 2000 variant possesses the most advanced AEW&BM capabilities in service today. It is the fifth-generation production E-2C Hawkeye and incorporates significant enhancements in data management, connectivity, and situational awareness to support the Navy's evolving Theater Air and Missile Defense mission.
Such features of the E-2 Hawkeye family of jets make it an attractive choice for the military, resulting in NOC winning multiple orders for the same, like the latest one. Such orders are likely to boost Northrop’s revenue generation prospects in the military aircraft business arena.
NOC’s Growth Prospects
Factors like increasing defense spending by developed nations, rising defense investment from emerging economies, rapidly rising geopolitical tensions worldwide like the ongoing hostility in the Middle East and solid development in technological advancement of lethal aircraft have been bolstering the growth prospects of the combat jet market.
This must have prompted the Mordor Intelligence firm to project a CAGR of 5.2% for the global military aviation market over the 2024-2030 period. Such growth prospects should benefit Northrop as its product portfolio offers a wide range of manned and unmanned aircraft that already enjoys an established position in the military aviation market.
Notably, NOC’s Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization of military aircraft systems for the U.S. Air Force, the U.S. Navy, other U.S. government agencies, and international customers. Its major products include strategic long-range strike aircraft; tactical fighter and air dominance aircraft; airborne battle management and command and control systems; and unmanned autonomous aircraft systems, including high-altitude long-endurance strategic intelligence, surveillance and reconnaissance (ISR) systems and vertical take-off and landing tactical ISR systems.
Apart from E-2D, Northrop’s product portfolio includes many other combat-proven aircraft like the RQ-4 Global Hawk unmanned aircraft system (UAS), which provides high-resolution imagery of land masses for theater awareness and strategic ISR to the U.S. Air Force, Japan and the Republic of Korea. On the other hand, its B-2 Spirit stealth bomber aircraft is a key component of the United States’ long-range strike arsenal and one of the most survivable aircraft in the world.
Opportunities for Peers
The abounding growth prospects of the military aviation market should also benefit other defense majors that manufacture combat jets, such as Lockheed Martin LMT, Boeing BA and Textron TXT.
Lockheed Martin’s Aeronautics segment is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles and related technologies. Its major programs are the F-35 Lightning II Joint Strike Fighter jet, the C-130 Hercules airlifter, the F-16 Fighting Falcon jet and the F-22 Raptor jet.
LMT’s long-term earnings growth rate is 4.1%. Shares of LMT have returned 5.1% to its investors in the past year.
Boeing’s Defense, Space & Security segment engages in the research, development, production and modification of manned and unmanned military aircraft and weapons systems for strike, surveillance and mobility, including fighter and trainer aircraft; vertical lift, including rotorcraft and tilt-rotor aircraft and commercial derivative aircraft, including anti-submarine and tanker aircraft. Its primary products include fixed-wing military aircraft, F/A-18E/F Super Hornet, F-15 programs, P-8 programs, KC-46A Tanker and T-7A Red Hawk.
Boeing’s long-term earnings growth rate is 27.5%. The Zacks Consensus Estimate for its 2024 sales indicates growth of 2.1% from the 2023 reported figure.
Textron’s business unit, Textron Aviation Defense, designs, builds and supports versatile and globally known military aircraft, preferred for training and attack missions. Some of Textron’s renowned products are the Beechcraft T-6C trainer and the AT-6 Wolverine.
The company boasts a long-term earnings growth rate of 10.1%. The Zacks Consensus Estimate for its 2024 sales indicates growth of 5.6% from the previous year’s reported number.
Price Movement
In the past year, shares of Northrop have lost 1.4% compared with the industry’s 9.5% decline.
Zacks Rank
Northrop currently carries 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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