Northrop Grumman Wins $445M Air Force Deal To Support LAIRCM

Northrop Grumman Systems Corp.’s (NYSE:NOC) business unit, Northrop Grumman Systems Corp., recently secured a contract to support the AAQ-24 large aircraft infrared counter-measure (LAIRCM) direct sales public private partnership for repair of 34 national stock numbers. Work related to this deal is scheduled to be over by Dec 14, 2022 and will be executed in Warner Robins, GA.

Valued at $444.6 million, the contract was awarded by the Air Force Sustainment Center, Robins Air Force Base, GA. Foreign military funds (FMS) funds will be used to partly finance the task.

A Brief Note on LAIRCM

The primary purpose of Northrop Grumman’s LAIRCM program is to protect large aircraft from man-portable missiles. On identifying a missile, LAIRCM activates a high-intensity, laser-based countermeasure system to track and destroy the missile automatically.

Our View

Of late, terrorist groups have been increasingly using cheap yet deadly man-portable missiles. Thus, an effective anti-missile solution for the protection against such threats is the need of the hour. A well-equipped nation like the United States thus will always want to remain prepared for sudden attacks.

Moreover, over the past few months, repeated missile threats from North Korea have forced the United States to ramp up its focus toward its missile defense space. Undoubtedly, this has led the Trump administration to multiply its arsenal treasury, both in terms of attacking missiles as well as accumulating protective measures like LAIRCM.

Currently, Northrop Grumman’s AN/AAQ-24(V) Directional Infrared Countermeasure (DIRCM) system is the only DIRCM system in production that protects an aircraft from infrared-guided missiles. LAIRCM is one variant of such a DIRCM. Considering the present situation in the nation and Northrop Grumman’s combat-proven LAIRCM, more contracts like the recent one can be expected to boost Northrop’s sales.

Moreover, per Markets and Markets research firm, the global rocket and missile market is projected to grow at a CAGR of 4.74% during 2017-2022 to reach a value of $70 billion by 2022. This further reflects substantial growth prospects for defense majors like Northrop Grumman that offer counter-measures against missile threats.

Further, the Senate’s approval for the $700 billion National Defense Authorization Act this September indicates significant inflow of contracts for the front-row defense stocks in the United States. Therefore, the time is ripe for adding defense majors like Northrop Grumman, Lockheed Martin Corporation (NYSE:LMT) , Raytheon Company (NYSE:RTN) and The Boeing Company (NYSE:BA) , in your watchlist.

Price Performance

Northrop Grumman’s stock has returned 15.5% in last three months, outperforming the 10.3% rally of the industry it belongs to. This may have been driven bythe fact that the company’s product line is well positioned in high priority categories, such as defense electronics, unmanned aircraft and missile defense.

Zacks Rank

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

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