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Northrop (NOC) Wins $54M Deal to Support Global Hawk Program

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Northrop Grumman Corp.’s (NOC - Free Report) business unit, Northrop Grumman Systems, recently secured a $53.7-million contract to support the RQ-4A Global Hawk Broad Area Maritime Surveillance - Demonstrator (BAMS-D) aircraft. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Per the deal terms, Northrop Grumman Systems Corp. will provide maintenance, logistics and sustainment engineering services to support the RQ-4A Global Hawk unmanned surveillance aircraft. This will further enable the aircraft to be mission-capable for intelligence, surveillance and reconnaissance missions for the U.S. Navy.

Majority of the work related to the deal will be performed in Patuxent River, MD. The contract is expected to be complete by April 2022.

Significance of the Global Hawk Aircraft

Northrop’s Global Hawk is an unmanned surveillance aircraft, which provides military field commanders with high-resolution, near-real-time imagery of large geographic areas. Powered by a Rolls-Royce (RYCEY - Free Report) AE 3007 turbofan engine, these jets can fly for as long as 32 hours on one load of fuel.

Apart from intelligence collection, a portion of the Global Hawk fleet helps air and ground users with communications relay support. Its intelligence-gathering capabilities allow civil authorities to respond to natural disasters, conduct search-and-rescue operations, and gather weather and atmospheric data to help forecasters predict the paths of storms.

Northrop’s Growth Prospects

In recent times, the increasing geopolitical conflicts across borders have prompted nations worldwide to enhance their surveillance manifold and in this, unmanned aerial vehicles (UAVs) like Global Hawk play a pivotal role, since they offer services with minimum human casualties. As a result, demand for unmanned surveillance jets is on the rise on a global scale. This is evident from the latest contract won by Northrop, alongside a massive $4.8-billion contract the company acquired in November 2020 to conduct development, modernization, retrofit and sustainment activities for the Global Hawk program.

Such proactive approach of governments toward expanding their surveillance aircraft stocks has, in turn, bolstered the need for integration of the surveillance systems with the latest Satellite Communication (SATCOM) network. The latest contract win by Northrop is a bright example of that.

To this end, it is imperative to mention that the global UAV market, per a Markets and Markets report, is projected to expand at a CAGR of 16.4% to reach $58.4 billion by 2026 from 2021, with increasing procurement of military UAVs by defense forces worldwide being one of the primary growth catalysts. Such impressive growth projections should usher in more such contract wins for Northrop, with the company being one of the major UAV manufacturers.

Other Defense Players Poised to Benefit

Considering the growth prospects of the global UAV market, it is quite obvious that other major manufacturers of surveillance jets like Boeing (BA - Free Report) and Lockheed Martin (LMT - Free Report) will also benefit.

Notably, Boeing’s P-8 is truly a multi-mission maritime patrol aircraft, which excels at anti-submarine warfare; anti-surface warfare; intelligence, surveillance and reconnaissance; and search and rescue.

Meanwhile, Lockheed’s U-2 Dragon Lady has been supporting the U.S. Air Force’s mission of superior surveillance for 65 years.

Zacks Rank & Price Performance

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

Shares of this defense giant have witnessed 17.2% growth in the year-to-date period against the industry’s decline of 16.2%.

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