Northrop (NOC) Wins Deal to Supply GQM-163A Coyote SSST Systems

Northrop Grumman Corp.’s NOC business unit, Northrop Grumman Systems Corp., recently clinched a modification contract involving the GQM-163A Coyote Supersonic Sea-skimming Targets (SSST) systems. The deal has been awarded by the Naval Air Systems Command, Patuxent River, MD.

Details of the Deal

Valued at $52.1 million, the contract is projected to be completed by November 2027. The latest modification offers Northrop options to procure and deliver 16 GQM-163A Coyote SSST systems, along with associated technical and administrative data. These deliveries should aid the full rate production of the 17 lot of SSST.

A major portion of the work related to this contract will be carried out in Chandler and Camden, AZ.

What does Coyote SSST do?

The GQM-163A “Coyote” target vehicle serves the purpose of supporting the critical mission of testing ship anti-cruise missile defenses for U.S. and allied navies. It is a threat-representative target used by the U.S. Navy to prepare, train, and qualify systems and crews aboard naval vessels.

Northrop’s Role in Missile Defense

Amid the widespread increase in geopolitical tensions worldwide, nations, of late, have been strengthening their defense arsenal. With rapid technological upgrades, missile defense has steadily become pivotal in a nation’s defense strategy.

With the United States being the world’s largest weapon supplier and Northrop being a leading provider of end-to-end missile defense capabilities to support this nation’s security, increased missile defense adoption by nations worldwide provides the company with solid growth opportunities. The latest contract win is a bright example of that.

Notably, Northrop is a leading provider of interceptors and targets used in the test and verification of the nation's missile defense systems and interceptor boosters employed in the defense of the homeland against long-range ballistic missile attacks, backed by its proven expertise in providing reliable launch vehicles.

In particular, NOC’s GQM-163A target is now operationally capable at four different launch test sites around the world. Due of its unique capabilities, GQM-163A launches have been conducted for several foreign customers in addition to the U.S. Navy. This, along with the fact that the U.S. Navy ordered 218 Coyote targets as of July 2022, as well as the latest contract win to deliver 16 more, surely reflects the solid demand that this product enjoys in the missile defense space.

Growth Prospects

Of late, hostile activities like the Russian invasion of Ukraine and the ongoing unrest in the Middle East have prompted the need for nations across the globe to expand their missile defense capabilities enormously. This, in turn, has set the stage for the missile defense market to expand even more in recent times.
To this end, the Mordor Intelligence firm predicts theglobal marketfor missiles and missile defense systems to witness a CAGR of 4.82% between 2024 and 2029.

This should benefit Northrop, which is the leading provider of target launch vehicles used to test the United States’ most critical defense systems. The company is one of the top suppliers of solid rocket propulsion for air-launched missiles, interceptors, submarine-launched weapons and hypersonic missile systems.

Opportunities for Peers

As global threats continue to rise, apart from Northrop, defense contractors that are likely to benefit from the growth opportunities offered by the missiles and missile defense system market are:

RTX Corp RTX: The company provides advanced sensors and interceptors to identify, track and defeat threats as part of a layered missile defense.

For instance, RTX’s Upgraded Early Warning Radar provides early detection and precise tracking of incoming ballistic missiles, as well as quick, accurate determination of threat versus non-threat objects. On the other hand, its Next Generation Over-the-Horizon Radar (OTHRs), designed with increased sensitivity, when compared to legacy OTHRs, comes with improved target detection.

Lockheed Martin LMT: This company plays a critical role when it comes to the missile defense strategy adopted by the United States. Notably, its Space Based-Infrared System uses infrared surveillance to provide early missile warnings for the U.S. military and is considered one of the nation’s highest-priority space programs.

On the other hand, LMT’s Targets and Countermeasures Program provides targets designed to represent adversary missiles for realistic testing, while its Long Range Discrimination Radar program is the backbone of the Missile Defense Agency’s layered defense strategy to protect the U.S. homeland from ballistic missile attack.

Boeing BA: This renowned aircraft manufacturer has been building and supporting air and missile defense systems to protect the United States and its allies against threats ranging from intercontinental ballistic missiles to hostile aircraft, for nearly 25 years.

Its Patriot Advanced Capability-3 (PAC-3) Missile seekers have protected warfighters, allies and international partners around the world from tactical ballistic missiles, cruise missiles and hostile aircraft, for the past 20 years. Boeing’s Ground-based Midcourse Defense system is the United States' only operationally deployed missile defense program capable of defending the entire U.S. homeland against long-range ballistic missile attacks.

Price Performance

In the year-to-date period, shares of NOC have lost 2.2% compared with the industry’s 12.6% decline.

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Zacks Rank

Northrop currently has 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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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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