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Northrop's (NOC) Unit Secures $2.32B Deal to Support ICBM

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Zacks Equity Research
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Northrop Grumman’s NOC business unit, Northrop Grumman Systems Corp., has recently clinched a contract $2.32-billion contract related to the Minuteman III Intercontinental Ballistic Missile (ICBM) propulsion subsystem. The contract was awarded by the Air Force Nuclear Weapons Center, Hill Air Force Base, UT.

Details of the Deal

Per the deal terms, Northrop Grumman Systems Corp. will provide engineering support and program management support services for the ICBM propulsion subsystem. It will also assist the U.S. government in maintaining the Minuteman III weapon system.

Additionally, Northrop Grumman’s subsidiary will provide hardware and software maintenance, developmental and production engineering, and focus on improving ICBM’s system-level performance.

Work related to the deal will be carried out in Corrine and Magna, UT, and is expected to be completed by Nov 5, 2040.

A Brief Note on Minuteman III ICBM

The Minuteman III ICBM, built by Boeing BA, is a strong nuclear deterrent that is being used by the U.S. Air Force Combat Command. The Minuteman III missile is a strategic weapon system using a ballistic missile of intercontinental range. These ballistic missiles are dispersed in hardened silos to protect against attack and connected to an underground launch control center through a system of hardened cables.

What’s Favoring Northrop Grumman?

In recent times, heightened geopolitical tensions, conflicts and rising terrorism across the globe have compelled nations to fortify their military arsenals, with ballistic missile systems constituting an integral part of it. Such events tend to significantly boost the business of major missile makers, such as Northrop Grumman. In fact, in September 2020, the U.S. Air Force awarded the company with a potential $13.3-billion contract to build the Ground-Based Strategic Deterrent intercontinental ballistic missile system.

Interestingly, The current U.S. administration recently presented the President’s FY 2022 discretionary funding request for the Department of Defense to Congress. The administration has asked for $753 billion in national security funding, reflecting an increase of 1.6% that includes $715 billion for the Defense Department. Such solid budgetary amendments, if approved, should enable Northrop Grumman in the future to procure more significant contracts related to supporting ballistic missiles, like the latest one.

Other Missile Makers Also Poised to Benefit

Considering the geopolitical background, which is favorable for missile market growth as a whole, and the fact that the United States is the largest military weapon exporter globally, other prominent missile makers in the nation, such as General Dynamics GD and Raytheon Technologies RTX are poised to benefit.

Notably, General Dynamics’ Ordnance and Tactical Systems are the system integrators of the 2.75-inch Hydra-70 family of rockets. It also produces composite rocket motor cases and launch tubes for tactical and strategic missiles.

Similarly, Raytheon Technologies' missile defense capabilities include Patriot GEM-T missiles, SM-6 missile destroys cruise missiles and ballistic missiles, NASAMS, among others.

Zacks Rank & Price Performance

Northrop Grumman currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, Northrop Grumman’s shares have gained 15.8% compared with the industry’s 13.2% growth.

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Northrop Grumman Corporation (NOC) : Free Stock Analysis Report

The Boeing Company (BA) : Free Stock Analysis Report

General Dynamics Corporation (GD) : Free Stock Analysis Report

Raytheon Technologies Corporation (RTX) : Free Stock Analysis Report

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