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Northrop Grumman Wins $65M Deal for MQ-4C Triton Production

Zacks Equity Research

Northrop Grumman Corp.’s NOC business subsidiary, Northrop Grumman Systems Corp., recently secured an advance acquisition contract worth $65.1 million for manufacturing and delivering three MQ-4C Triton unmanned aircraft system (UAS). The three Triton UAS will be delivered to the U.S. Navy and the Australian Government from the low-rate initial production (LRIP) 5th Lot. The contract was awarded by the Naval Air Systems Command, Patuxent River, MD.

Additionally, per deal terms, Northrop Grumman will provide equipment and associated materials for three ground stations. Majority of the work will be conducted in San Diego, CA; Salt Lake City, UT, and other locations across the United States. Work related to the deal is expected to get completed in June 2020.

A Brief Note on MQ-4C Triton

MQ-4C Triton is a broad-area maritime-surveillance (BAMS) UAS manufactured by Northrop Grumman for the U.S. Navy. It is a high-altitude, long-endurance UAS that provides real-time intelligence, surveillance and reconnaissance (ISR) across vast oceans and coastal regions.

Triton UAS supports a wide range of missions, including maritime ISR patrol, signals intelligence, and search, rescue and communications relays. This is because Triton incorporates a reinforced airframe for increased internal payload, and de-icing and lightning protection systems, which allow the aircraft to descend and ascend through harsh maritime weather environments to gain close view of ships and other targets at sea.

Northrop Grumman’s Prospects in Australia

Midway last year, the Australian government announced its intentions to purchase six MQ-4C Triton UAS from Northrop Grumman, with a total approximate investment of $1.03 billion. This has been a significant boost for the company in terms of international growth.

What Favors Northrop Grumman?

Triton, being one of the next-generation UAS, has inevitably been reaping the benefits of increasing demand for unmanned aircraft.

To this end, it is imperative to mention that during the first quarter of 2019, Northrop Grumman’s Aerospace Systems sales increased a solid 7% year over year on higher autonomous sales, reflecting higher volumes across several programs, including Triton. We believe that strong order flow for Triton will similarly boost this segment’s growth in the days ahead.

Now, looking ahead into the future prospects of this program, the global unmanned aerial vehicle (UAV) market is projected to see a CAGR of 14.5% during the 2018-2025 period to reach a value of $52.3 billion (per Markets and Markets research firm). This growth can be primarily attributed to the increased requirement of UAVs for Intelligence, Surveillance and Reconnaissance (ISR) purposes, combat operations, and battle damage management. Such impressive projections indicate improved growth opportunities for UAV makers like Northrop Grumman, in the years to come.

Price Performance

Shares of the company have gained 18.5% in the past six months compared with the industry’s growth of 2.3%.



Zacks Rank & Other Key Picks    

Northrop Grumman currently carries a Zacks Rank #2 (Buy).

A few similar-ranked stocks in the same sector are Wesco Aircraft Holdings WAIR, Lockheed Martin Corporation LMT and Leidos Holdings
LDOS, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wesco Aircraft’s long-term growth estimates currently stand at 12%. The Zacks Consensus Estimate for 2019 earnings has increased 3.7% to 84 cents in the past 60 days.

Lockheed Martin came up with average positive earnings surprise of 17.35% in the last four quarters. The Zacks Consensus Estimate for 2019
earnings has increased 5.4% to $20.53 in the past 60 days.

Leidos Holdings came up with average positive earnings surprise of 6.81% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 1.1% to $4.58 in the past 60 days.

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