Northrop Grumman Wins $13M Deal For Spider Increment IA

Northrop Grumman Corp.’s (NYSE:NOC) unit, Systems Corp., has secured a modification contract for low-rate initial production of the Spider Increment IA remote control unit. Valued at $13.4 million, the deal has been awarded by the U.S. Army Contracting Command, NJ.

Scheduled to be completed by Feb 13, 2019, the work will be performed in Madison, AL and Melbourne, FL. The fiscal 2016 and 2017 other procurement (Army) funds will be used to complete the task.

A Brief Note on Spider Increment IA

Spider Increment 1 is a hand-emplaced, remotely controlled, man-in-the-Loop, anti-personnel munition system that is presently being fielded.

Meanwhile, Spider Increment IA is being developed as an ensuing incremental development to the baseline Spider Program. It will develop and offer an improved control station that will make use of the common Increment 1 munitions and accessories.

Additionally, this latest system will have a new control station that will include a better mapping capability. It will also be capable of seamlessly communicating the munition field status and location to the Mission Command based on the availability of an unclassified network.

Spider Increment IA is a Special Interest Program with Office of the Secretary of Defense oversight (operational testing only).

Development in Defense Space

Rising terror activities and current tension between the United States and North Korea have resulted into growth of the industry. In sync with this, the United States and its major allies have been strengthening their defense to combat the internal and external threats.

On this note, the U.S. Senate recently passed fiscal 2018 defense policy bill worth $700 billion that was proposed in July 2017. This bill provides about $640 billion fund for Pentagon’s main operations like buying weapons and paying the troops. The rest $60 billion for Overseas Contingency Operations will be utilized to fund the conflicts in Afghanistan, Iraq, Syria and elsewhere.

Consequently, the current scenario in the defense industry is anticipated to further aid large companies like Northrop Grumman, The Boeing Co. (NYSE:BA) and Lockheed Martin Corporation (NYSE:LMT) .

Our View

Northrop Grumman seems to benefit from its strong presence in Air Force, Space & Cyber Security programs. Moreover, the company’s product innovation and focus on strengthening its ISR wing will help maintain a stable earnings stream amid rapidly changing requirements of the defense landscape.

Being one of the largest domestic defense contractors, Northrop Grumman also gets regular orders from the various verticals of the U.S. Defense. Evidently, the company's unit, Aerospace Systems, secured a contract valued at $130.5 million for the Japan Global Hawk program.

Price Movement

Since Northrop Grumman’s announcement of Orbital ATK (NYSE:OA) acquisition, shares of the company have gained 8.2% compared with the industry’s growth of 5.1%. This shows that the news of the acquisition has received positive response from the market.

Zacks Rank

Northrop Grumman carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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