Northrop Grumman Corp.’s (NOC - Free Report) business unit, Northrop Grumman Systems Corp., recently secured a modification contract involving its E-2D Advanced Hawkeye aircraft. The award has been provided by the Naval Air Systems Command, Patuxent River, MD.
Details of the Deal
Valued at $32.6 million, the contract is expected to be completed by December 2027. The latest modification enables Northrop to provide continued fabrication and installation support to include Tactical Targeting Network Technology and the Beyond Line of Sight for the E-2D Advanced Hawkeye aircraft.
Majority of the work related to this deal will be carried out in Melbourne, FL.
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 E-2D Hawkeye aircraft boasts battle management, theater air, missile defense and multiple sensor fusion capabilities in an airborne system. These provide the warfighter with expanded battlespace awareness, especially in the area of information operations.
Through its effective radar sensor and robust network-enabled capability, the Advanced Hawkeye aircraft provides critical, actionable data to joint forces and first responders.
Such features of the aircraft 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 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, apart from E-2D, NOC builds the B-2 Spirit Stealth Bomber jet, which is the only long-range penetrating stealth bomber in the U.S. arsenal. Looking ahead, Northrop continues to lead the charge in making stealth aircraft with the world’s first sixth-generation jet, the B-21 Raider. Among unmanned air solutions, its MQ-4C Triton deserves a special mention because it provides real-time intelligence, surveillance, reconnaissance and targeting (ISR&T) over vast ocean and coastal regions.
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 - Free Report) , Boeing (BA - Free Report) and Textron (TXT - Free Report) .
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 include 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’s 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. The segment also manufactures rotorcraft and rotary-wing programs, such as CH-47 Chinook, AH-64 Apache and V-22 Osprey.
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 include the Beechcraft T-6C trainer and the AT-6 Wolverine.
The company boasts a long-term earnings growth rate of 11.9%. 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 risen 1.8% against the industry’s 7.4% decline.
Image Source: Zacks Investment Research
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.
