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BAE Systems (BAESY) Wins Deal for Radio Communication Systems

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BAE Systems plc’s (BAESY - Free Report) business unit, BAE Systems Technology Solutions and Services, recently clinched a modification contract to provide research and development, engineering, technical and logistics support services in support of the delivery of radio communication systems. Valued at $32.3 million, the contract is projected to be completed in June 2027.

The deal has been awarded by the Naval Air Warfare Center Aircraft Division, Patuxent River, MD. The radio communication system is mainly required for shipboard installation in support of the Ship and Air Integration Warfare Division.

The majority of the work involved in the deal will be carried out in Saint Inigoes, MD.

BAE Systems' Prospects in Radio Communications

Nations are increasing spending to strengthen their defense systems. Developing as well as developed economies are focused on improving their warfare capabilities by spending on military arsenals and equipment. Hence, spending on effective radio communication that could ensure safe and secured transmission of data is also gaining momentum.

The increased demand for an effective tactical communication system that could improve interoperability in the military to carry out various missions provides an edge to companies like BAESY.

BAE Systems provides leading-edge radio frequency communications and data links, military aircraft controls and displays, platform integration, flight control systems, head-up displays, automatic test equipment systems and integrated flight control electronics in next-generation military aircraft.

Such expertise in the effective tactical communication system that could integrate various military platforms has resulted in multiple contracts for BAE Systems. The latest contract win is a testament to that.

Looking ahead, per the report from the Markets and Markets research firm, the Global Military Communications Market is projected to witness a CAGR of 3.4% during the 2020-2029 period.

Such forecasts highlight immense growth opportunities for companies like BAE Systems. BAESY may continue to secure deals from Marine Corps, involving the radio communications system, thus boosting its revenues from the communications and control business.

Peer Prospects

Bright prospects of the military communications market will not only benefit BAE Systems but also defense majors, namely:

Lockheed Martin’s (LMT - Free Report) Universal Communications System business platform (UCP) allows the integration of all types of fixed and mobile radio and data-related systems, transforming any radio system into a fully IP-based network. The UCP is vendor and equipment agnostic and can be used with any existing radio and system.

Lockheed Martin’s long-term (three to five years) earnings growth rate is pegged at 3.6%. The Zacks Consensus Estimate for LMT’s 2021 earnings indicates an improvement of 0.1% in the past 60 days. Lockheed Martin’s shares have returned 4% in the past year.

L3Harris Technologies’ (LHX - Free Report) product range includes tactical SATCOM terminals, RO Tactical Radio and the RO-Mobile Awareness program, which offers rapid, global push-to-talk and visual Situational Awareness capabilities for users in remote locations.

L3Harris Technologies’ long-term earnings growth rate is pegged at 6.5%. LHX’s shares have returned 17% in the past year.

Northrop Grumman’s (NOC - Free Report) Battlefield Airborne Communications Node (BACN) combined with Global Hawk provides warfighters the essential information to pursue and defeat the enemy. BACN's Airborne Executive Processor enables a persistent Gateway in the sky that receives, bridges and distributes communication among all participants in a battle.

Northrop Grumman has a long-term earnings growth rate of 8.9%. The Zacks Consensus Estimate for NOC’s fourth-quarter earnings indicates an improvement of 0.2% in the past 60 days. Northrop Grumman’s investors have gained 32.7% in the past year.

Price Movement

In the past year, shares of BAE Systems have rallied 6.8% against the industry’s decline of 28.5%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Zacks Rank

BAE Systems currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.