Northrop (NOC) Builds Advanced Radar for the F-35 Lightning II
Northrop Grumman Corporation NOC recently revealed that it is building an advanced radar system for the stealth F-35 Lightning II fighter jet. The new radar system, AN/APG-85, will replace the earlier AN/APG-81 active electronically scanned array radar system.
With this declaration, the company aims to incorporate advanced technologies and signal processing techniques that will be well-suited for all the variants of the F-35 Lightning II.
What’s Favoring Northrop Grumman?
Northrop Grumman plays a critical role in the production of the F-35 Lightning II family of jets. Thus, the company stands to benefit from the strong demand the jet enjoys in the military landscape.
In this context, it is imperative to mention that apart from eight international program partners, F-35 is being procured by eight other foreign military sales (FMS) customers of the United States. Such an intense demand for the jet is certain to benefit NOC, which provides many other key technologies for the jet apart from radars.
The U.S. Government boasts a current inventory objective of 2,456 aircraft for the U.S. Air Force, the U.S. Marine Corps and the U.S. Navy, commitments from seven international partner countries and eight FMS customers and interests from other countries.
The highly sought-after demand for the military jet may witness a handful of orders for the F-35 Lightning II. This may act as a catalyst for the growth of Northrop Grumman, whose technologically advanced products act as a cornerstone for many military jets.
Moreover, NOC’s continuous effort to take a step forward in developing more advanced technologies to meet the ever-changing dynamics of the military world provides a competitive edge to the company. In this regard, the company invested $2.5 billion in capex, and research and development in 2022.
Going forward, with an anticipated rise in key military programs, Northrop Grumman may witness a steady inflow of orders involving military equipment and arsenals, including radars.
Growth Prospects
The rising geopolitical tensions and the threat of terrorism globally have resulted in countries fortifying their defense spending to reinforce their national defense systems. In such a scenario, the demand for technologically advanced radars, which can assure the advanced surveillance of the rising threat on the land, sea and air, may increase.
Per a report published by the Fortune Business Insights firm, the military radar market is projected to expand at a CAGR of 6.3% during the 2021-2028 period. This should benefit NOC and prominent defense majors like Lockheed Martin LMT, L3Harris Technologies LHX and Raytheon Technologies RTX as they play a significant role in manufacturing radars.
Lockheed Martin’s radars are designed with the highest degree of commonality and fully integrated systems. These can operate in all environments and are available in highly mobile configurations and deployed worldwide. Its portfolio of radars includes the AN/APY-9 radar, the IRST21 Sensos system, AN/TPQ-53 radar systems, SPY-7, the long-range discrimination radar and a few more.
Lockheed Martin’s long-term earnings growth rate stands at 6.2%. LMT shares have returned 20.7% in the past year.
L3Harris manufactures a handful of combat-proven radars like the SPS-48, land-based surveillance radars, the AN/APY-11 Multimode radar, the Tactical Air Surveillance radar, the AN/SPS-48G Long-range 3D surveillance radar and many more.
The long-term growth rate of L3 Harris is pegged at 2.7%. The Zacks Consensus Estimate for LHX’s 2023 earnings suggests a growth rate of 3.9% from the prior-year estimated figure.
Raytheon Intelligence & Space has been at the forefront of tactical fighter radar technology. Some of its products include APG-79, APG-82, Phantom Strike, B-52 AESA Radar, etc.
The long-term growth rate of Raytheon is pegged at 9.5%. RTX shares have rallied 6.9% in the past year.
Price Movement
In the past year, shares of Northrop Grumman have risen 14.3% against the industry’s decline of 10.2%.
Image Source: Zacks Investment Research
Zacks Rank
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.
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