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Northrop Grumman's Unit Wins Navy Deal to Modernize AARGM
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Northrop Grumman Corp.’s (NOC - Free Report) business segment, Innovation Systems, recently secured a modification contract for procuring the full-rate production of Advanced Anti-Radiation Guided Missile’s (“AARGM”) 7th lot. Work related to the deal is scheduled to be completed by March 2020.
Details of the Deal
Valued at $22 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the terms of the deal, Northrop Grumman will conduct the conversion of U.S. government-provided AGM-88B High Speed Anti-Radiation Missiles into 29 AGM-88E AARGM all-up-rounds for the Italian government and three for the U.S. Navy.
The company will also procure related supplies and services that are necessary for manufacturing, delivery, sparing, and fleet deployment, involving the full-rate production of AARGM’s 7th lot.
Majority of the work will be executed in Northridge, CA. The contract includes 92% of the work for non-U.S. DoD participants and 8% for the U.S. Navy.
A Brief Note on AARGM
AARGM is a supersonic, medium-range, air-launched tactical missile compatible with U.S. and allied strike aircraft, including all variants of the F/A-18, Tornado, EA-18G, F-16, EA-6B, and F-35. The missile offers extended-range engagement as well as organic, in-cockpit emitter targeting capability and situational awareness.
Northrop’s Role in Missile Defense
Of late, terrorist groups have been increasingly using cheap yet deadly man-portable missiles. Thus, an effective anti-missile solution for the protection against such threats is the need of the hour. A well-equipped nation like the United States is thus consistently striving to strengthen its missile defense capability.
Along with the United States, other powerful nations across the globe are increasing their missile strength. Rising demand for procuring missiles has thus boosted the prospects of the global rocket and missile market, which is projected to witness a CAGR of 4.74% during 2017-2022 to reach a value of $70 billion by 2022 (per Markets and Markets research firm).
Such a rapidly expanding market for missile defense has prompted major U.S. defense contractors like Northrop Grumman to increase their focus on developing state-of-the-art missiles and making them even more advanced. In this regard, Northrop Grumman’s AARGM holds immense importance with its latest version 88E, incorporating an advanced digital anti-radiation homing (“ARH”) sensor and precise Global Positioning System (“GPS”)/Inertial Navigation System (“INS”) guidance.
These features have improved the value of AARGM in terms of advanced signal processing as well as vastly improved frequency coverage and detection range, thereby making these most sought-after missiles on the wish list of the world’ top-class militaries.
Meanwhile, to reap the benefits of the expanding missile market, Northrop Grumman acquired renowned missile-maker Orbital ATK for $9.2 billion in June 2018. The buyout has enabled Northrop Grumman to expand its product portfolio with Orbital ATK's rocket motors, missiles and electro-optical countermeasure product lines.
Price Performance
In a year’s time, shares of Northrop Grumman have rallied about 11.5% compared with the industry's 22.8% growth. The underperformance may have been caused by intense competition that the company faces in both domestic and international markets.
Zacks Rank & Key Picks
Northrop Grumman currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings , Engility Holdings and Huntington Ingalls Industries (HII - Free Report) . While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Huntington Ingalls and Engility carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings climbed 30.9% to $1.27 over the last 90 days.
Engility Holdings delivered an average positive earnings surprise of 19% in the preceding four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 16.1% to $2.02 over the last 90 days.
Huntington Ingalls pulled off an average positive earnings surprise of 9.48% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 6.4% north to $17.24 over the last 90 days.
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Northrop Grumman's Unit Wins Navy Deal to Modernize AARGM
Northrop Grumman Corp.’s (NOC - Free Report) business segment, Innovation Systems, recently secured a modification contract for procuring the full-rate production of Advanced Anti-Radiation Guided Missile’s (“AARGM”) 7th lot. Work related to the deal is scheduled to be completed by March 2020.
Details of the Deal
Valued at $22 million, the contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Per the terms of the deal, Northrop Grumman will conduct the conversion of U.S. government-provided AGM-88B High Speed Anti-Radiation Missiles into 29 AGM-88E AARGM all-up-rounds for the Italian government and three for the U.S. Navy.
The company will also procure related supplies and services that are necessary for manufacturing, delivery, sparing, and fleet deployment, involving the full-rate production of AARGM’s 7th lot.
Majority of the work will be executed in Northridge, CA. The contract includes 92% of the work for non-U.S. DoD participants and 8% for the U.S. Navy.
A Brief Note on AARGM
AARGM is a supersonic, medium-range, air-launched tactical missile compatible with U.S. and allied strike aircraft, including all variants of the F/A-18, Tornado, EA-18G, F-16, EA-6B, and F-35. The missile offers extended-range engagement as well as organic, in-cockpit emitter targeting capability and situational awareness.
Northrop’s Role in Missile Defense
Of late, terrorist groups have been increasingly using cheap yet deadly man-portable missiles. Thus, an effective anti-missile solution for the protection against such threats is the need of the hour. A well-equipped nation like the United States is thus consistently striving to strengthen its missile defense capability.
Along with the United States, other powerful nations across the globe are increasing their missile strength. Rising demand for procuring missiles has thus boosted the prospects of the global rocket and missile market, which is projected to witness a CAGR of 4.74% during 2017-2022 to reach a value of $70 billion by 2022 (per Markets and Markets research firm).
Such a rapidly expanding market for missile defense has prompted major U.S. defense contractors like Northrop Grumman to increase their focus on developing state-of-the-art missiles and making them even more advanced. In this regard, Northrop Grumman’s AARGM holds immense importance with its latest version 88E, incorporating an advanced digital anti-radiation homing (“ARH”) sensor and precise Global Positioning System (“GPS”)/Inertial Navigation System (“INS”) guidance.
These features have improved the value of AARGM in terms of advanced signal processing as well as vastly improved frequency coverage and detection range, thereby making these most sought-after missiles on the wish list of the world’ top-class militaries.
Meanwhile, to reap the benefits of the expanding missile market, Northrop Grumman acquired renowned missile-maker Orbital ATK for $9.2 billion in June 2018. The buyout has enabled Northrop Grumman to expand its product portfolio with Orbital ATK's rocket motors, missiles and electro-optical countermeasure product lines.
Price Performance
In a year’s time, shares of Northrop Grumman have rallied about 11.5% compared with the industry's 22.8% growth. The underperformance may have been caused by intense competition that the company faces in both domestic and international markets.
Zacks Rank & Key Picks
Northrop Grumman currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings , Engility Holdings and Huntington Ingalls Industries (HII - Free Report) . While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Huntington Ingalls and Engility carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aerojet Rocketdyne came up with an average positive earnings surprise of 9.27% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings climbed 30.9% to $1.27 over the last 90 days.
Engility Holdings delivered an average positive earnings surprise of 19% in the preceding four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 16.1% to $2.02 over the last 90 days.
Huntington Ingalls pulled off an average positive earnings surprise of 9.48% in the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 6.4% north to $17.24 over the last 90 days.
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.
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