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Northrop Grumman Wins $217M Air Force Deal to Support BACN

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Northrop Grumman Corp.’s NOC subsidiary, Northrop Grumman Systems Corp., recently secured a modification contract valued at $217.2 million for supporting Battle Field Airborne Communication Node (BACN) payload operation, equipment and services. The contract was awarded by the Air Force Life Cycle Management Center's Space, Hanscom Air Force Base, MA.

Work related to the deal will be executed in San Diego, CA, along with other overseas locations and is expected to get completed by Jan 23, 2021.

How is the BACN Beneficial?

Northrop Grumman's BACN facilitates persistent communication ranging from small ground units to the highest command levels in the battlefield. BACN, combined with the company's Global Hawk unmanned surveillance aircraft, provides fighters with essential information. The system operates on four E-11As modified Bombardier BD-700 Global aircraft and three high-altitude drones.

It is an airborne communications relay and gateway system that bridges the gap between theater operations, mountainous terrain-inhibited line-of-sight communications and diverse weapon systems, enabling essential situational awareness from small ground units in contact up to the highest command levels.

Our View

In recent times, the demand for airborne communication systems has been on the rise, primarily resulting from growing cross-border disputes and rising global geopolitical instabilities. Such a demand rise has been benefiting defense giants like Northrop Grumman, which specializes in manufacturing airborne communication systems, in the form of frequent contract wins like the latest one.

Further, we believe that Northrop Grumman has significant growth potential based on the U.S. government's increased focus on Intelligence Surveillance Reconnaissance (ISR), airborne communication systems, force protection and cybersecurity.

Per a report by Markets and Markets Research, the global military communications market is expected to reach $37.7 billion by 2023, at a CAGR of 3.6%, from 2018. This, in turn, indicates increased demand for airborne communication systems. As one of the premier defense giants in the United States, Northrop Grumman is expected to benefit a great deal from such projections.

Price Performance

Shares of the company have surged 41.3% in a year compared with the industry’s growth of 14.8%.

Zacks Rank & Stocks to Consider

Northrop Grumman currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks in the same sector are Heico Corporation HEI, L3Harris Technology Inc LHX and Leidos Holdings, Inc. LDOS. While Heico sports a Zacks Rank #1, L3Harris and Leidos carry a Zacks Rank #2

Heico’s long-term growth estimate currently stands at 11.3%. The company delivered a positive earnings surprise of 12.27%, on average, in the last four quarters.

L3Harris’ long-term growth estimate currently stands at 8%. The company delivered a positive earnings surprise of 5.02%, on average, in the last four quarters.

Leidos Holdings delivered a four-quarter earnings beat of 8.93%, on average. It currently has a solid long-term earnings growth rate of 7.5%.

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