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Northrop Grumman (NOC) Wins $41M Navy Deal for MQ-4C UAS

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Northrop Grumman Corp.’s (NOC - Free Report) subsidiary, Northrop Grumman Systems Corp., recently secured a $41.2 million modification contract in relation to MQ-4C Triton unmanned air system (UAS). Under the agreement, the company will provide test, maintenance and logistics support services to sustain MQ-4C Triton UAS air vehicles, mission control and operator training systems. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Per the terms of the deal, the company will also offer technical support and services to ensure that the MQ-4C UAS aircraft are capable for intelligence, surveillance and reconnaissance missions supporting its early operating capability.  

Majority of the work related to the deal will be executed in Patuxent River, MD, while the rest will be carried out in other locations such as Point Mugu, CA; Jacksonville, FL; and Yigo, Guam. The entire work is expected to get completed in March 2019. Northrop Grumman will utilize fiscal 2018 operations and maintenance (Navy), and fiscal 2018 aircraft procurement (Navy) funds for completing the task.

Advantages of MQ-4C UAS Air Vehicles

Northrop Grumman’s MQ-4C Triton UAS is equipped to provide real-time intelligence, surveillance and reconnaissance (ISR) over vast ocean and coastal regions. The system is also equipped with a robust mission sensor suite that provides 360-degree coverage on all sensors, providing unprecedented maritime domain awareness for the U.S. Navy.

Triton incorporates a reinforced airframe for increased internal payload, and also wing for hail, bird strike, and gust load protection, along with de-icing and lightning protection systems. These features enable the aircraft to descend and ascend through harsh maritime weather environments, to gain a closer view of ships and other targets at sea, when required. Widely used by the U.S. Navy, Triton UAS supports a wide range of missions, including maritime ISR patrol, signals intelligence, search and rescue, and communications relay.

What’s Favoring Northrop Grumman?

During the first quarter of 2018, Northrop Grumman’s Aerospace Systems sales increased a solid 9.9%, driven majorly by manned aircraft sales as well as autonomous systems like Triton. We believe strong order flow for Triton, like the latest one, will boost this segment’s growth in the days ahead.

Furthermore, from perspective of the programs’ overseas growth, Australia continues to make progress toward procuring Triton for supporting its critical maritime ISR requirements. Also, during the first quarter, the State Department approved Germany's request to purchase Triton. Such growing demand from the overseas market should boost the program's sales further.

Meanwhile, last month the U.S. Senate approved the fiscal 2019 defense budget that provisioned investments of $21.7 billion for aircraft. Such budgetary developments reflect solid growth prospects for the company’s Aerospace Systems segment, which, in turn, are likely to boost the company’s profit margin.

Price Performance

Shares of Northrop Grumman have rallied about 21.5% in a year compared with the broader industry’s growth of 31%. The underperformance may have been caused by the intense competition that the company faces in both domestic and international markets.



Zacks Rank & Key Picks    

Northrop Grumman currently sports a Zacks Rank #1 (Strong Buy). A few other top-ranked stocks in the same space are Lockheed Martin Corp. (LMT - Free Report) , The Boeing Company (BA - Free Report) and Engility Holdings , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boeing came up with an average positive earnings surprise of 29.51% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 4.48% to $14.68 in the last 90 days.

Lockheed Martin came up with an average positive earnings surprise of 7.45% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 3.67% to $16.09 in the last 90 days.

Engility Holdings came up with an average positive earnings surprise of 15.08% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has risen by 0.5% to $1.91 in the last 90 days.

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