Northrop Grumman Wins Deal to Build B-2 Trailing Edge Units

Northrop Grumman Corp.’s NOC subsidiary, Northrop Grumman Systems Corp., secured a contract to manufacture B-2 hot trailing edge production units. Work related to the deal is scheduled to be completed by the end of Oct 1, 2024.

Valued at $42.8 million, this four-year base contract has been awarded by the Defense Logistics Agency Aviation, Tinker Air Force Base, OK. The entire task will be carried out in Oklahoma, Ohio, Missouri, and California.

A Brief Note on B-2

B-2 stealth bomber aircraft is a key component of the United States’ long-range strike arsenal. Backed by its unique capabilities, including the stealth characteristics, this aircraft can penetrate the most sophisticated enemy defenses and hold at risk high value, heavily defended targets.

Notably, B-2 is the only U.S. aircraft that combines long-range, large payload and stealth in a single platform, giving it the ability to project air power anywhere in the world. Additionally, the jet has the ability to carry more than 20 tons of conventional and nuclear ordnance, and deliver it precisely under any weather conditions.

Northrop Grumman Prospects

In the U.S. aerospace-defense market, military aircraft is gaining significance owing to rapid increase in cross-border tensions over the past couple of years. This has prompted the development and integration of new tactical and logistical features in the nation’s existing aircraft fleet along with the inclusion of improved radar systems and the availability of advanced system engineering services.

Being a prominent aircraft manufacturer, Northrop Grumman is benefiting from such crucial developments in the form of aircraft manufactures and associated contract flows like the latest one. This, in turn, bodes well for the company’s Aerospace Systems unit that develops and designs military aviation aircraft, manned aircraft, autonomous systems and spacecraft.

As the B-2’s prime contractor, Northrop Grumman leads an industry team that is working with the U.S. Air Force to modernize the B-2 to ensure that it remains fully mission capable against evolving worldwide threats. This must have encouraged Pentagon to award more contracts involving B-2. The latest contract win is a testament to that. Such contract flows should bolster the Aerospace segment’s top line in the coming days.

Furthermore, the fiscal 2020 defense budget includes a spending plan of $57.7 billion on aircraft, reflecting a massive increase of 166% from the approved fiscal 2019 defense spending on aircraft.

With B-2 being a significant defense program for the government of the United States, we can expect more contract inflows like the latest one in the near future.

Price Performance

In a year’s time, shares of Northrop Grumman have gained 16.9% compared with the industry’s 7.2% rise.

Zacks Rank & Other Key Picks    

Northrop Grumman currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same sector are L3Harris Technology Inc LHX, Teledyne Technologies Incorporated TDY and Wesco Aircraft Holdings, Inc. WAIR. While L3Harris Technology and Teledyne Technologies sport a Zacks Rank #1 (Strong Buy), Wesco Aircraft has a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

L3Harris’ long-term growth estimate currently stands at 8%. The company delivered average positive earnings surprise of 4.21% in the last four quarters.

Teledyne Technologies long-term growth estimate currently stands at 7.5%. The company delivered average positive earnings surprise of 9.26% in the last four quarters.

Wesco Aircraft’s long-term growth estimate is pegged at 12%. The Zacks Consensus Estimate for 2019 earnings has moved 1.2% up to 85 cents over the past 60 days.

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