Northrop (NOC) Wins Navy Deal To Upgrade EA-18G Aircraft

Defense bellwether, Northrop Grumman Corporation’s (NYSE:NOC) business unit, Systems Corp., has won a modification contract worth $20.1 million. According to the latest contract Northrop will offer additional funds to upgrade EA-18G aircraft. The award was received from the U.S. Navy.

Per the terms of the deal, the additional funds will help Northrop to enhance the airborne electronic attack (AEA) system for the AN/ALQ-218(V) 2 receiver on the EA-18G aircraft. Work related to this deal is expected to be accomplished by July 2019 and will be carried out in Point Mugu, CA.

A Brief Note on EA-18G & AEA

The Boeing Company’s (NYSE:BA) EA-18G Growler is the most advanced AEA aircraft that can operate from an aircraft as well as from land bases. The EA-18G integrates advanced AEA capabilities which have been developed and manufactured by Northrop for identifying, degrading and destroying hostile radar-guided air defense and communication systems.

Additionally, as the principal subcontractor to Boeing, Northrop designs and produces the EA-18G entire center fuselages and center barrel replacement assemblies and integrates all the associated subsystems including the electronic attack capabilities as well as conducting after-delivery product support.

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. Northrop is a leading name in AEA technology, having designed, manufactured and delivered the first electronic attack systems more than five decades ago. Over the years, Northrop has refined and expanded AEA capabilities to ensure successful completion of missions.

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, Boeing 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 7.2% compared with the industry’s gain of 3.5%. 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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