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Northrop (NOC) Arm Wins Deal for Submarine Missile Program

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Northrop Grumman Corporation’s (NOC - Free Report) business unit, Northrop Grumman Systems Corp., recently clinched a contract involving the Columbia and Dreadnought Fleet Ballistic Missile Program. Valued at $458 million, the contract is projected to be completed by Nov 30, 2027.

Details of the Deal

The deal has been awarded by Strategic Systems Programs, Washington, D.C. Per the terms, Northrop Grumman will provide shipyard field operations, program management, systems engineering, documentation, logistics and hardware production activities to support the Columbia and Dreadnought Fleet Ballistic Missile Program.

The majority of the work involved in the deal will be carried out in Sunnyvale, CA.

What’s Favoring Northrop Grumman?

The rising geopolitical tensions globally have resulted in countries fortifying their defense spending to reinforce their national defense systems. This has led to a huge demand for defense products. Missiles, a significant part of submarines, have also recorded a surge in demand.

In this context, Columbia and Dreadnought Fleet Ballistic Missile submarines enjoy huge demand due to their state-of-the-art features that excel in efficiently carrying out military operations.

Against this backdrop, NOC remains a key defense player in the United States as it strives to improvise mission capability in the undersea domain to ensure strategic dominance from the seabed to space. Also, it continues to provide launcher subsystem hardware in support of the Columbia and Dreadnought common missile compartment program.

Considering the underlying strength of Columbia and Dreadnought Fleet Ballistic Missile submarines, the demand for such support activities may continue to trend upward, which, in turn, will result in a strong order inflow for Northrop Grumman. The latest contract win is a testament to that.

Growth Prospects

Per Mordor Intelligence, the missiles and missile defense system market is projected to expand at a CAGR of 8% during the 2022-2031 period. This should benefit Northrop Grumman and prominent missile manufacturers like Raytheon Technologies (RTX - Free Report) , General Dynamics (GD - Free Report) and Boeing (BA - Free Report) .

Raytheon offers a variety of combat-proven missile defense systems, including the Patriot missile, Standard Missile-6, Standard Missile-3, Advanced Medium-Range Air-to-Air Missile, Evolved Seasparrow Missile, the Tomahawk cruise missile and a few more.

Raytheon’s long-term earnings growth rate stands at 10.5%. The Zacks Consensus Estimate for RTX’s 2022 sales suggests a growth rate of 5.8% from the prior-year period.

General Dynamics’ Ordnance and Tactical Systems maintains a leading position in providing missile subsystems in support of U.S. tactical and strategic missiles, provisioning both legacy and next-generation missiles with critical aerostructures, control actuators, high-performance warheads and cutting-edge hypersonic rocket cases.

The long-term growth rate of General Dynamics is pegged at 9.8%. GD shares have rallied 10% in the past year.

Boeing’s missile defense capabilities provide defensive and strategic systems that protect the homeland and deployed forces. The company’s systems within the Integrated Air & Missile Defense portfolio include Arrow 3, which offers regional missile defense capabilities to enable an effective response to short and medium-range ballistic missiles.

The long-term growth rate of Boeing is pegged at 4%. BA shares have rallied 10.3% in the past month.

Price Movement

In the past year, shares of NOC have surged 18.9% against the industry’s decline of 44.5%.

Zacks Investment Research
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Zacks Rank

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.