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Northrop Wins $135M Deal to Support Air Launch Cruise Missile

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Northrop Grumman Corp.’s (NOC - Free Report) subsidiary, Northrop Grumman System Corp., recently secured a contract for supporting the remanufacturing activities related to the air launch cruise missile inertial navigation element. Valued at $135 million, the contract was awarded by the Air Force Nuclear Weapons Center, Tinker Air Force Base, OK.

Per the deal terms, Northrop Grumman System Corp. will provide support services, such as disassembling, cleaning, inspection, maintenance, re-assembling, testing and finishing actions, as required for remanufacturing the inertial navigation element. Work related to the deal will be primarily performed in Salt Lake City, UT, and is expected to get completed by Sep 3, 2034.

What Favors Northrop Grumman?

In the backdrop of the heightening geopolitical uncertainties around the world, several developing countries have significantly increased their spending on missile defense. The increased spending can also be attributed to advancements and integration of new tactical features, equipment and other services. Notably, Northrop Grumman has been making considerable efforts to keep its missile defense programs upgraded. The latest contract awarded by the company is a testament to that.

Looking ahead, the U.S. fiscal 2021 defense budget provisions for investments worth $20.3 billion on missile defense, which is 49.3% higher than the previous year’s provision. Such budgetary developments should benefit Northrop Grumman in acquiring contracts related to missile defense, going ahead.

Looking Ahead

The global missiles and missile defense systems market, valued at $55 billion in 2018, is projected to witness a CAGR of 6%, to reach $93.0 billion by 2027 (as per Research and Markets firm’s report). Such projections reflect increased growth opportunities for major missile-players like Northrop Grumman, Lockheed Martin (LMT - Free Report) , Raytheon Technologies (RTX - Free Report) and Boeing (BA - Free Report) in the aforementioned market.

Notably, Raytheon Technologies offers a variety of combat-proven missile defense systems, including the Patriot missile, Standard Missile-6 (SM-6), Standard Missile-3 (SM-3), Advanced Medium-Range Air-to-Air Missile (AMRAAM), Tomahawk cruise missile and a few more.

Lockheed Martin’s missile defense program includes the Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD) air and missile defense programs. It also manufactures the Multiple Launch Rocket System (MLRS), Joint Air-to-Surface Standoff Missile (JASSM) and Javelin tactical missile programs, alongside other tactical missiles.

Posing stiff competition, Boeing’s Integrated Air & Missile Defense portfolio includes Arrow 3, which offers regional missile defense capabilities to enable an effective response to short and medium-range ballistic missiles. It also produces the Missile Seeker for PAC-3 that uses hit-to-kill technology to defeat the entire spectrum of tactical ballistic missiles, cruise missiles and hostile aircraft.

Zacks Rank & Price Performance

Northrop Grumman carries a Zacks Rank #3 (Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the year-to-date period, Northrop Grumman’s shares have gained 1.2% against the industry’s 21% decline.

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