Northrop (NOC) Arm Wins Deal For Radar Installation In MQ-8C

Defense major Northrop Grumman Corporation’s (NYSE:NOC) business unit, Systems Corp., recently clinched a modification contract for installing ZPY-8A/N radar in MQ-8C Fire Scout helicopter. Work related to this deal is expected to be over by May 2020.

Details of the Deal

Valued at $15.2 million, the contract was awarded by Naval Air Systems Command, Patuxent River, MD. Per the terms of the deal, the company will install original equipment manufacturer (OEM) ZPY-8A/N radar in MQ-8C chopper. Alongside, Northrop will integrate the initial radar A-kit and provide additional non-recurring engineering in the aircraft.

Majority of the work will be executed in Fort Worth, TX and Ozark, AL; while the remaining part will be carried out in San Diego and Santa Clarita, CA and Edinburgh, U.K. The company will utilize fiscal 2017 research, development, test and evaluation (Navy) funds to complete the task.

A Brief Note on MQ-8C

Fire Scout is a combat proven, autonomous helicopter system designed by Northrop, which offers real-time Intelligence, Surveillance, Reconnaissance, and Target-acquisition (ISR&T), laser designation, and battle management to tactical users without relying on manned aircraft or space-based assets. There are two variants of Fire Scout, MQ-8C being one of them.

MQ-8C Fire Scout is the Navy’s next generation autonomous helicopter. Its airframe is based on the commercial Bell 407, an advanced helicopter with more than 1,600 airframes produced by Textron Inc. (NYSE:TXT) .

The helicopter can take-off and land on any aviation-capable ship from both prepared and unprepared landing zones automaticatically. This helps to lower the reliance on man power. This enhancement increases the target range and endurance (more than double) and payload capacity (more than triple) of the helicopter.

Our View

Being one of the largest aerospace and defense contractors in the United States, Northrop’s product line serves high-priority categories such as defense electronics, unmanned aircraft and missile defense satisfactorily. With more than 75 years of experience in advanced autonomy from the sea-floor to space, Northrop’s autonomous systems expand the boundaries of human potential to deliver end-to-end solutions that meet evolving mission requirements for a rapidly changing world. On top of that, its management is consistently innovating to ensure that the company’s autonomous platforms can meet the evolving mission requirements of its customers, both domestic and overseas.

Meanwhile, rising terrorism and the recent spate in political hostility between the United States and North Korea have provided a solid boost to the aerospace and defense industry. Concurrently, the United States and its major allies’ move to strengthen their arsenals to combat the internal and external threats provided a substantial impetus to the stocks.

On this note, the U.S. Senate recently passed fiscal 2018 defense policy bill worth $700 billion which provides about $640 billion fund for Pentagon’s main operations like buying weapons and paying the troops.

Consequently, the current scenario in this industry is anticipated to boost defense majors like Northrop, The Boeing Company (NYSE:BA) and Lockheed Martin Corporation (NYSE:LMT) , as is evident from increasing number of contracts being awarded by the Pentagon in recent months. We believe the latest contract is an instance of the same and expect the company to win more such deals, in days ahead.

Price Movement

Since Northrop’s announcement of Orbital ATK (NYSE:OA) acquisition, shares of the company have rallied 5.8% compared with the industry’s gain of 3.1%. This shows that the news of the acquisition has received positive response from the market.

Zacks Rank

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

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