Northrop Grumman Corp. NOC recently secured a modification contract worth $235 million involving Next Generation Overhead Persistent Infrared (OPIR) Polar Space Vehicles 1 and 2. The work related to the deal will be carried out at Redondo Beach, CA.
The contract, which is expected to be completed by Jul 25, 2026, has been awarded by the Space Systems Command, Los Angeles Air Force Base, CA. The latest modification brings the cumulative value of the contract to $2.15 billion.
Importance of OPIR
Northrop Grumman’s Next-Generation OPIR polar-orbiting satellite, known as NextGen Polar (NGP), plays a key role in providing strategic missile warning for the nation’s defense. The NGP has the capability to cover the most difficult region to monitor from space – the northern polar region.
The NGP, equipped with advanced modeling and simulation, will provide excellent coverage of the entire northern hemisphere. The enhanced communication system allows customers to transmit wide-band OPIR data to the ground.
What’s Ahead?
As nations continue to strengthen their defense structure, defense spending on military satellite systems increases manifold, backed by demand for technologically advanced orbital assets strategically designed for missile interception and recognition.
According to a report by the Research and Markets firm, the global military satellites market is expected to witness a CAGR of 4.2% during the 2023-2027 period. This should benefit NOC, which enjoys an extensive satellite portfolio containing Evolved Strategic SATCOM, Protected Tactical SATCOM, and a few more.
The company’s latest achievement in this area includes the August 2023 contract by the Space Development Agency to design and build 36 data transport satellites, the first space vehicles in the latest generation of its low-Earth orbit Proliferated Warfighter Space Architecture. In the same month, NOC successfully delivered two major components of the Arctic Satellite Broadband Mission and started the next phase of pre-launch preparations. Such developments and contract wins involving military communication systems, including the latest one, should boost its revenue generation prospects in the coming months.
Peer Prospects
Considering the solid growth opportunities offered by the global military satellite market, other defense primes like Lockheed Martin LMT, Airbus SE EADSY, L3Harris Technologies Inc. LHX, with a strong presence in this space, should also benefit.
Lockheed Martin uses cutting-edge technologies to build capabilities that comprise layered space defense systems. The LM 400, a multi-mission satellite that can be tailored for almost any mission, is LMT’s most flexible satellite bus with capabilities that can serve military, civil or commercial users. In September 2023, LMT deployed 10 satellites into low-Earth orbit in support of the SDA’s Tranche 0 Transport Layer mission.
LMT boasts a long-term earnings growth rate of 8.4%. The Zacks Consensus Estimate for Lockheed’s 2023 sales indicates an improvement of 1% from that reported in 2022.
Airbus is a world leader in military satellite communication services with a very broad portfolio of services, including the SATCOMBw, Syracuse 4A and 4B, Skynet 5 and many more. Airbus has been a long-term operator of the SATCOMBw secure satellite communications system for Germany’s Armed Forces.
EADSY boasts a long-term earnings growth rate of 12.4%. The Zacks Consensus Estimate for Airbus’ 2023 sales indicates an improvement of 17.8% from that reported in 2022.
L3Harris is the prime contractor of Navigation Technology Satellite – 3 (NTS-3). The NTS-3, to be launched later this year, will provide for the safety and success of the warfighters with its accurate and uninterrupted positioning, navigation and timing technology. In September 2023, it successfully demonstrated the U.S. Department of Defense’s new anti-jam Satellite Communications waveform at the U.S. Indo-Pacific Command’s Northern Edge 2023 Exercise.
LHX boasts a long-term earnings growth rate of 3.8%. The Zacks Consensus Estimate for L3Harris’ 2023 sales indicates an improvement of 9.9% from the year-ago reported number.
Price Performance
In the past six months, shares of NOC have gained 0.7% against the industry’s 17.6% decline.
Image Source: Zacks Investment Research
Zacks Rank
Northrop Grumman currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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