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Northrop Grumman Wins $490M Deal for Global Hawk Program

Northrop Grumman Corp .'s NOC Aerospace Systems recently secured a $489.9-million foreign military sales (FMS) contract for the Japan Global Hawk program. The contract was awarded by the Air Force Life Cycle Management Center, Wright-Patterson Air Force Base, Ohio.

Details of the Deal

Per the deal, Northrop Grumman will provide three RQ-4 Global Hawk Block 30i air vehicles, each containing an enhanced integrated sensor suite payload. It will also provide two ground control elements, spares and support equipment, system engineering and program management tasks along with a site survey.

Work related to the deal will be performed in San Diego, CA and is expected to get complete by Sep 1, 2022. Additional FMS funding will be awarded to the company as priced options as soon as Japan releases the remaining funds.

A Brief Note on RQ-4 Global Hawk Block 30i Air Vehicles

The Northrop Grumman RQ-4 Global Hawk is an unmanned (UAV) surveillance aircraft, which provides military field commanders with high resolution, near real-time imagery of large geographic areas. The Global Hawk provides a flexible platform for multiple sensor payloads to be used together, delivering mission-critical information to various users around the world. The same intelligence-gathering capabilities also allow civil authorities to respond to natural disasters, conduct search-and-rescue operations, and gather weather and atmospheric data to help forecasters predict the paths of storms.

Northrop's International Sales

Northrop Grumman, being one of the major defense companies in the United States, enjoys heavy inflow of international orders for its varied products. Notably, the company had international sales of $1,099 million in the third quarter of 2018, registering 27.1% year-over-year growth.

What Favors Northrop Grumman?

Toward the end of June, the fiscal 2019 U.S. defense budget made provisions for spending $21.7 billion on aircraft. Such budgetary developments reflect solid growth prospects for the company's Aerospace Systems segment. These, in turn, are likely to boost Northrop Grumman's profit margin.

Northrop Grumman receives frequent contracts from its large customer base. This subsequently increases the demand for its technical services, spares and support equipments, which, in turn, should boost sales.

Looking Ahead

Per Markets and Markets research firm, the Unmanned Aerial Vehicle (UAV) market was previously valued at $20.7 billion in 2018, which is now projected to reach $52.3 billion by 2025 at a CAGR of 14.15%. The rise in the procurement of military UAVs by defense forces worldwide is one of the most significant factors projected to drive growth of the UAV market. Further, the increasing use of UAVs in various commercial applications, such as monitoring, surveying and mapping, precision agriculture, aerial remote sensing, and product delivery is also contributing to growth.

Price Performance

Shares of Northrop Grumman have declined 11.5% in a year against the broader industry 's growth of 3.3%. The underperformance may have been caused by the intense competition the company faces in both domestic and international markets.

Zacks Rank & Key Picks

Northrop Grumman currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the same sector are Aerojet Rocketdyne Holdings AJRD , Raytheon Company RTN and The Boeing Company BA .

While Aerojet Rocketdyne sports a Zacks Rank #1 (Strong Buy), Raytheon and Boeing carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Aerojet Rocketdyne came up with average positive earnings surprise of 19.27% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has increased 43.3% to $1.82 in the past 90 days

Raytheon delivered average positive earnings surprise of 6.71% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings has moved up 1.7% to $10.10 cents in the past 90 days.

Boeing pulled off average positive earnings surprise of 28.01% for the trailing four quarters. The Zacks Consensus Estimate for 2018 earnings has moved 3% north to $15.05 in the past 90 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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