Northrop Grumman Corp.’s NOC business unit, Northrop Grumman Systems Corp., recently clinched a contract for supplying precision guidance kits (PGKs). The award has been offered by the Army Contracting Command, Newark, NJ.

Valued at $40.5 million, the contract is expected to be completed by May 21, 2028. The work related to this deal will be executed in Plymouth, MN.

What’s Favoring NOC Stock?

With nations across the globe striving to modernize and enhance their defense capabilities amid evolving geopolitical tensions, a significant rise in military spending by the majority of governments has been witnessed over the past decade. This modernization has also been boosting the demand for precision-guided munitions that can accurately engage targets while minimizing collateral damage, aligning with the strategic shift toward more efficient and effective combat operations.

Technological advancements have also been resulting in escalating demand for PGKs, with innovative navigation and targeting systems, such as GPS and inertial navigation technologies, having significantly improved the accuracy and reliability of these kits.

As a result, defense product manufacturers like Northrop Grumman are witnessing a solid inflow of contracts for their combat-proven PGKs. The latest contract win is a bright example of that.

Notably, the U.S. Army has successfully used NOC’s PGKs to upgrade conventional 155mm artillery to a level of accuracy that has approached near precision for almost a decade now.

What Lies Ahead for NOC Stock?

Looking ahead, increasing political and territorial issues among multiple nations worldwide over the past decade have been boosting the demand for precision-guided munitions significantly. This must have prompted Precedence Research firm to predict that the global precision-guided munition market will witness a CAGR of 6.6% during the 2025-2034 time period.

Such a solid market projection should bolster Northrop’s growth opportunities, with this prime defense being at the forefront of continuously making significant innovations in their PGK offerings.

Notably, recognizing the challenges posed by adversaries employing GPS jamming techniques, Northrop Grumman has developed the Precision Guidance Kit – Extended Range (PGK-ER). This advanced kit maintains the form factor of its predecessors while incorporating technologies designed to operate effectively in GPS-degraded environments. Such adaptability ensures that artillery units can maintain operational effectiveness even under electronic warfare conditions. Additionally, the PGK-ER is compatible with both existing artillery inventories and new developments, such as the U.S. Army's 58-caliber cannon, highlighting its versatility and cost-effectiveness.

What About Other Defense Stocks?

Other defense primes that are expected to gain from the global precision-guided munition market’s growth are mentioned below:

BAE System BAESY: Its APKWS laser guidance kit transforms unguided 2.75-inch (70 millimeters) rockets like the Hydra 70 Mk 66 and others into precision-guided munitions (PGMs). Qualified on numerous U.S. Department of Defense platforms, APKWS laser guidance kits provide affordable surgical-strike capability to multiple rotary-wing and fixed-wing platforms.

The stock boasts a long-term (three-to-five years) earnings growth rate of 11.9%. The Zacks Consensus Estimate for BAESY’s 2025 sales reflects an improvement of 53.7% from the 2024 reported figure.

Lockheed Martin LMT: The company’s Paveway II Plus Laser Guided Bomb integrates an advanced guidance system to convert conventional gravity bombs into precision-guided munitions. It can be used in all Paveway II LGB weapon configurations and aircraft, and is compatible with the MK 80 series and BLU-109 warheads.

The stock boasts a long-term earnings growth rate of 7.8%. The Zacks Consensus Estimate for LMT’s 2025 sales reflects an improvement of 4.6% from the 2024 reported figure.

The Boeing Company BA: Its Joint Direct Attack Munition (JDAM) is a low-cost guidance kit that converts existing free-fall bombs into accurately guided smart weapons. Integrated on nearly every U.S. Air Force, U.S. Navy and U.S. Marine Corps combat aircraft, including the F-35, JDAM has recorded greater than 95% system reliability during testing.

The stock boasts a long-term earnings growth rate of 17.4%. The Zacks Consensus Estimate for BA’s 2025 sales reflects an improvement of 25.6% from the 2024 reported figure.

Northrop Stock Price Performance

In the past month, shares of NOC have risen 9% compared with the industry’s 5.4% rise.

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Northrop’s Zacks Rank

Northrop currently has 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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