Northrop Grumman Corp .'s NOC business division, Aerospace Systems, recently secured a delivery order to procure two engineering development model operational test program sets for supporting the E-2D Advanced Hawkeye aircraft. Work related to the deal will be carried out in Melbourne, FL.
Details of the Deal
Valued at $31 million, the contract was awarded by the Naval Air Warfare Center Aircraft Division, Lakehurst, NJ. The deal is expected to be completed by September 2021.
The company will utilize fiscal 2016 aircraft procurement (Navy) funds to finance the task.
A Brief Note on Hawkeye Aircraft
Hawkeye is an airborne, all-weather, tactical, early-warning aircraft used by the U.S. Navy. E-2D is the fourth version of the E-2 Hawkeye. The technology and gadgets fitted in this aircraft increase its visibility on targets far away. Notably, the E-2D Advanced Hawkeye has a structurally distinctive design - a rotating rotodome and four vertical stabilizer tail configurations that provide 360-degree surveillance at all times.
Northrop Grumman is also supported by other industry leaders on this program. Lockheed Martin Corp.'s LMT unit - Lockheed Martin Naval Electronics and Surveillance Systems - supplies the principal AN/APY-9 radar system. For the Hawkeye, L-3 Technologies Inc.'s LLL unit supplies the ultra-high frequency electronically scanned array antenna. Meanwhile, Raytheon Company's RTN Space and Airborne Systems provides the T-56-A engines.
Of late, the Hawkeye jets, which have been used for several purposes like surveillance and missile tracking, has proved itself indispensable to the U.S. Navy.
Northrop Grumman Prospects
Northrop Grumman's Aerospace Systems unit develops and designs military aviation aircraft, manned aircraft, autonomous systems and spacecraft. It receives a steady inflow of contracts from the Pentagon and the foreign allies of the United States. As a result, this segment has been witnessing solid top-line growth.
In the second quarter of 2018, the Aerospace Systems unit generated solid revenue growth of 11% backed by higher volumes of manned aircraft programs. With the E-2D Hawkeye Aircraft being a significant defense program for government of the United States, we can expect more such contract inflows in the near future. These contracts along with the latest deal should enable the Aerospace Systems unit to post impressive results in the upcoming quarters as well.
Recently, the company also acquired rocket and missile maker Orbital ATK for $9.2 billion. This strategic buyout will enable Northrop Grumman to enhance its product portfolio and capability in manufacturing technologically advanced combat platforms. It will also benefit from Orbital ATK'S knowledge and expertise in satellites, spacecraft components and commercial space-launch systems. Moreover, the acquisition is expected to result in strong combined cash flow generation that will allow Northrop Grumman to innovate more such notable weaponries for the United States.
Furthermore, the fiscal 2019 defense budget, which received the Senate's approval this July, provisioned major war fighting investments of $21.7 billion for aircraft programs. Such inclusions indicate at a solid growth prospects for Northrop Grumman's segment in terms of contract wins. This, in turn, is likely to boost the company's profit margin, in days ahead.
In a year's time, shares of Northrop Grumman have rallied about 14.2% compared with the industry 's 23.6% growth. The underperformance may have been caused by the intense competition that the company faces in both domestic and international markets.
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 .
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