Northrop Grumman Corp.’s (NOC - Free Report) subsidiary, Northrop Grumman Systems Corp., recently secured a contract for providing fleet support to the Hunter unmanned aircraft system (UAS). The deal is expected to be completed by May 9, 2020.
Valued at $163.9 million, the contract was awarded by the U.S. Army Contracting Command, Redstone Arsenal, AL. Per the terms of the deal, the company will conduct operations, maintenance, engineering, re-engineering and remanufacturing of the Hunter unmanned aircraft system.
Work related to the deal will be executed in Sierra Vista, AZ.
Attributes of Hunter Aircraft
Northrop Grumman’s MQ-5B Hunter is a long endurance, medium altitude, multi-mission, tactical UAS. It has been optimized to provide the Army division and corps commanders with a dedicated Intelligence, Surveillance, and Reconnaissance (ISR) capability.
Hunter conducts battlefield surveillance using multiple sensors including its multi-mission EO/IR/LD/LRF/Illuminator and SIGINT payloads. Its multi-payload capability provides enhanced situational awareness and the ability to proactively plan and execute decisive combat operations.
What’s Favoring Northrop Grumman?
Cost effectiveness compared with manned aircraft and zero mortality that UAS offers have been driving demand for military drones. Hunter, being one of the unmanned special mission aircraft solutions offered by Northrop Grumman, no doubt has been reaping the benefits of this increased demand for UAS.
In this regard, it is imperative to mention that Northrop Grumman’s Aerospace Systems sales increased a solid 7% year over year during the first quarter of 2019. Notably, the autonomous programs like the Hunter UAS were one of the major contributors to this upside. Undoubtedly, the latest contract win will allow this segment to continue the momentum in the upcoming quarterly results.
Now, the global unmanned aerial vehicle (UAV) market is projected to see a CAGR of 14.2% during the 2018-2025 period to reach a value of $52.3 billion (per Markets and Markets research firm). This uptick can be specifically attributed to the increased requirement of UAVs for Intelligence, Surveillance, and Reconnaissance (ISR) purposes, combat operations and for battle damage management. Such projections indicate increased growth opportunities for UAV makers like Northrop Grumman in the years to come.
Shares of Northrop Grumman have declined 5.6% in a year compared with the industry’s 0.2% drop.
Zacks Rank & Other Stocks to Consider
Northrop Grumman currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same space are Leidos Holdings, Inc. (LDOS - Free Report) , Lockheed Martin Corp. (LMT - Free Report) and Wesco Aircraft Holdings, Inc. (WAIR - Free Report) , each carrying a similar rank like Northrop Grumman. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Leidos Holdings delivered average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has moved up 1.1% to $4.58 over the past 60 days.
Lockheed’s delivered average positive earnings surprise of 17.35% in the trailing four quarters. The Zacks Consensus Estimate for 2019 earnings has climbed 4.1% to $20.28 over the past 90 days.
Wesco Aircraft’s long-term growth estimate currently stands at 12%. The Zacks Consensus Estimate for 2019 earnings has moved 3.7% north to 84 cents over the past 90 days.
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