Northrop Grumman Wins $255M Deal for MQ-4C Triton Production

Northrop Grumman Corp.’s NOC Northrop Grumman Systems Corp. unit recently secured a modification contract worth $255.3 million for low-rate initial production (LRIP) of three MQ-4C Triton unmanned aircraft from the 3rd Lot. Per the terms of the deal, the company will manufacture trade studies and tooling to support the Persistent Maritime Unmanned Aircraft Systems Program Office.

Details of the Deal

The contract was awarded by the Naval Air Systems Command, Patuxent River, Maryland. Majority of the work will be carried out in San Diego, CA; Baltimore, MD; Red Oak, TX and Palmdale, CA. The remaining work will be executed in other locations in the United States.

Northrop Grumman will utilize fiscal 2018 aircraft procurement (Navy) funds to complete the work by December 2021.

A Brief Note on MQ-4C Triton

MQ-4C Triton unmanned aircraft system (UAS) provides real-time intelligence, surveillance and reconnaissance (ISR) over vast ocean and coastal regions.

Based on the proven Global Hawk UAS, Triton is equipped with a unique and robust mission sensor suite that provides 360-degree coverage on all sensors. These sensors offer unprecedented maritime domain awareness for the U.S. Navy.

Built for the U.S. Navy, Triton supports a wide range of missions including maritime ISR patrol, signals intelligence, search and rescue and communications relay. The aircraft can fly over 24 hours at a time, at altitudes higher than 10 miles, with an operational range of 8,200 nautical miles.

Our View

With increasing security threats across the globe, nations are consistently boosting their arsenal. In November 2017, the U.S. Navy announced plans to deploy Triton to NAS Mayport, Florida, NAS Sigonella, Italy and the Middle East. Toward this end, the department has placed an order for 68 Triton aircraft, which we believe will enable Northrop Grumman to generate higher revenues.

During the third quarter of 2017, Northrop Grumman’s Aerospace Systems sales increased a solid 10.8%, driven by manned aircraft as well as autonomous systems like Triton. We believe strong order flow for Triton will boost this segment’s growth.

With the current U.S. administration in favor of huge defense spending, extensive revenue generation from the Triton program reflecting significant demand as well as latest contract wins from Pentagon, we expect Northrop Grumman to achieve its financial targets.

Price Movement

Northrop Grumman’s stock has moved up about 29.9% in a year, compared with the broader industry’s gain of 42.7%. The stock performance might have been hurt by intense competition in domestic and international markets.

 

Zacks Rank & Key Picks

Northrop Grumman carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the same sector are Curtiss-Wright Corporation CW, Leidos Holdings, Inc. LDOS and Huntington Ingalls Industries, Inc. HII, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Curtiss-Wright posted an average positive earnings surprise of 11.78% in the past four quarters. The Zacks Consensus Estimate for current-quarter earnings rose by 22 cents over the last 90 days.

Leidos Holdings has an average positive earnings surprise of 14.81% for the past four quarters. The Zacks Consensus Estimate for current-year earnings has risen by 17 cents in the last 90 days.

Huntington Ingalls posted an average positive earnings surprise of 14.22% over the last four quarters. The Zacks Consensus Estimate for current-year earnings moved up 56 cents over the past 90 days.

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