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Northrop Grumman Wins Air Force Deal to Upgrade F-16 Program

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Northrop Grumman Corp’s (NOC - Free Report) business unit, Northrop Grumman Systems Corp., recently secured an $18.7-million modification contractto procure active electronically scanned array (AESA) radars of Air Force F-16 aircraft. The contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, OH.

Work related to the deal will be completed in Linthicum Heights, MDand is expected to be completed byApril 2023.

AESA Radar & F-16

Northrop’s AESA radars help in providing a high degree of resistance to electronic jamming techniques and creating high bandwidth data links between aircraft and other equipped systems. These radars possess low interception capabilities compared with enemy radars. Furthermore, the improved radar technology enables fighter and legacy aircraft to quickly detect, track and identify a greater number of targets, and operate in hostile electronic environments.

Lockheed Martin’s (LMT - Free Report) F-16 Block 70 and Block 72 aircraft variants possess capability upgrades, most notably the AESA radar, with new avionics architecture and structural upgrades to extend the structural life of the aircraft.

Our View

In recent times, the demand for military radar systems has been on the rise, primarily resulting from growing cross-border disputes and rising global geopolitical instabilities. This significantly benefits defense giants like Northrop Grumman, which specializes in manufacturing complex and technologically-advanced radar systems. This, in turn, results in frequent contract wins, like the latest one. Northrop Grumman has been a leader in providing multi-mission radar solutions from sea to outer space over the last six decades.

Per Markets and Markets Research, the global military radar market is expected to reach $15.42 billion by 2022, at a CAGR of 3.4%. This indicates increased demand for ground and air-based radar systems. As one of the premier defense giants in the United States, Northrop Grumman is expected to benefit a great deal from such projections, given the huge opportunity for expansion that lies ahead.

Another radar manufacturer, Raytheon Technologies (RTX - Free Report) can also be expected to benefit from the aforementioned market’s expansion in the coming days.

Price Performance

Northrop’s stock has lost 5.2% in the past year compared with the industry’s 30.8% decline.



Zacks Rank & Key Pick   

Northrop currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is Embraer S.A. (ERJ - Free Report) , which holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Embraer delivered a positive earnings surprise of 14.93% in the last reported quarter. The company has a long-term earnings growth rate of 17%.

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