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Northrop Grumman (NOC) Wins $244M Deal to Offer AESA Radars
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Northrop Grumman Corp. (NOC - Free Report) recently clinched a contract to provide 72 Active Electronically Scanned Array (AESA) radars and spares. Per the terms, the defense giant will also offer support services related to these radar systems.
Valued at $243.9 million, the contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH. Work related to this deal will be carried out in Linthicum Heights, MD. The contract will utilize fiscal 2016 research, development, test and evaluation funds to complete the work, which is expected to be over by Jan 31, 2019.
A Brief Note on AESA
An AESA, also known as active phased-array radar, is a type of radar whose transmitter and receiver functions are composed of numerous small solid-state transmit/receive modules (TRMs). These radars enable aircraft pilots to gain more detection range, providing "first detect" for air-to-air engagements and enabling first shoot/first kill by missiles fired through Beyond Visual Range (BVR) mode.
Per management, Northrop has been at the forefront of AESA innovations for more than 60 years and currently offers more proven and affordable AESA solutions than anyone else. This, in turn, has enabled the company to be one of the top leaders in multi-mission radar solutions from sea to outer space.
Our View
Being the fourth largest U.S. defense contractor, Northrop Grumman supplies a broad array of products and services to the U.S. Department of Defense, including defense electronics, unmanned aircraft and missile defense. With respect to airborne fire control radars, the company has been the sole supplier for both U.S. Air Force fighter platforms of the future: the F-22 Raptor and F-35 Lightening II.
The company has lately been involved in developing its Scalable Agile Beam Radar (SABR), which is a full-performance fire control AESA. SABR offers all the advantages of an active electronically-scanned multi-function array, but at a significantly lower cost. Originally designed to fit Lockheed Martin Corp.’s (LMT - Free Report) F-16, the SABR is equipped to fit other aircraft platforms and mission areas as well.
Apart from consistently upgrading the F-16s with its SABR radar, Northrop is also delivering its SABR radars to international customers that started late last year. In addition, the company is working with the U.S. Air Force to support the Joint Urgent Operational Need for F-16 radar upgrades. Such developments, along with contract wins like the latest one, warrant an increase in revenue growth for Northrop in the days ahead.
Meanwhile, under the Trump administration’s additional fiscal 2017 appropriations, the White House requested an extra base budget of $24.9 billion and Overseas Contingency Operations (OCO) budget worth $5.1 billion, thereby taking the total budget appropriation to $30 billion for fiscal 2017. We expect the increased spending, if authorized, will be allocated to certain key areas that might unlock significantly higher opportunities for defense majors like Northrop.
Price Performance
Northrop’s stock has gained 20.9% in the last one year, underperforming the Zacks categorized Aerospace–Defense industry’s gain of 26.7%. This could be due to higher operating expenses continuing to partially impact Northrop Grumman’s profit margin.
Furthermore, in a highly competitive environment, customers might get attracted to similar products offered by its peers at a lower price, which remains a major concern. Northrop faces tough competition from its rivals like The Boeing Company (BA - Free Report) and General Dynamics Corp. (GD - Free Report) , both of which outperformed the broader industry’s gain in the last year.
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Northrop Grumman (NOC) Wins $244M Deal to Offer AESA Radars
Northrop Grumman Corp. (NOC - Free Report) recently clinched a contract to provide 72 Active Electronically Scanned Array (AESA) radars and spares. Per the terms, the defense giant will also offer support services related to these radar systems.
Valued at $243.9 million, the contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH. Work related to this deal will be carried out in Linthicum Heights, MD. The contract will utilize fiscal 2016 research, development, test and evaluation funds to complete the work, which is expected to be over by Jan 31, 2019.
A Brief Note on AESA
An AESA, also known as active phased-array radar, is a type of radar whose transmitter and receiver functions are composed of numerous small solid-state transmit/receive modules (TRMs). These radars enable aircraft pilots to gain more detection range, providing "first detect" for air-to-air engagements and enabling first shoot/first kill by missiles fired through Beyond Visual Range (BVR) mode.
Per management, Northrop has been at the forefront of AESA innovations for more than 60 years and currently offers more proven and affordable AESA solutions than anyone else. This, in turn, has enabled the company to be one of the top leaders in multi-mission radar solutions from sea to outer space.
Our View
Being the fourth largest U.S. defense contractor, Northrop Grumman supplies a broad array of products and services to the U.S. Department of Defense, including defense electronics, unmanned aircraft and missile defense. With respect to airborne fire control radars, the company has been the sole supplier for both U.S. Air Force fighter platforms of the future: the F-22 Raptor and F-35 Lightening II.
The company has lately been involved in developing its Scalable Agile Beam Radar (SABR), which is a full-performance fire control AESA. SABR offers all the advantages of an active electronically-scanned multi-function array, but at a significantly lower cost. Originally designed to fit Lockheed Martin Corp.’s (LMT - Free Report) F-16, the SABR is equipped to fit other aircraft platforms and mission areas as well.
Apart from consistently upgrading the F-16s with its SABR radar, Northrop is also delivering its SABR radars to international customers that started late last year. In addition, the company is working with the U.S. Air Force to support the Joint Urgent Operational Need for F-16 radar upgrades. Such developments, along with contract wins like the latest one, warrant an increase in revenue growth for Northrop in the days ahead.
Meanwhile, under the Trump administration’s additional fiscal 2017 appropriations, the White House requested an extra base budget of $24.9 billion and Overseas Contingency Operations (OCO) budget worth $5.1 billion, thereby taking the total budget appropriation to $30 billion for fiscal 2017. We expect the increased spending, if authorized, will be allocated to certain key areas that might unlock significantly higher opportunities for defense majors like Northrop.
Price Performance
Northrop’s stock has gained 20.9% in the last one year, underperforming the Zacks categorized Aerospace–Defense industry’s gain of 26.7%. This could be due to higher operating expenses continuing to partially impact Northrop Grumman’s profit margin.
Furthermore, in a highly competitive environment, customers might get attracted to similar products offered by its peers at a lower price, which remains a major concern. Northrop faces tough competition from its rivals like The Boeing Company (BA - Free Report) and General Dynamics Corp. (GD - Free Report) , both of which outperformed the broader industry’s gain in the last year.
Zacks Rank
Northrop currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>