Northrop Awarded $262 Million Contract for F-16 Radar Systems


By Rich Smith, MotleyFool

Defense contracting giant Northrop Grumman (NYSE:NOC) was awarded a $262.3 million defense contract by the U.S. Air Force this evening.

The largest contract headlining today's edition of the Pentagon's daily digest of contract awards, Northrop's contract concerns a "modification" of a prior award for the production and supply of Active Electronically Scanned Array radars that equip Air Force F-16 Falcon jet fighter aircraft. Specifically, the Air Force has exercised contract options to have Northrop manufacture and deliver "90 production radars, as well as associated support equipment and spares" and also to "15 engineering, manufacturing and development" units of the same radar.

F-16 Falcon frontal view


Tuesday's contract award amounts to approximately 2% of the annual revenue reported by Northrop Grumman's Mission Systems division, the unit that builds radars. According to data from S&P Global Market Intelligence, Northrop Grumman Mission Systems is the company's second biggest revenue contributor and its most profitable business unit per dollar of revenue, reporting operating profit margins of 13.4% on revenues of $12.3 million last year.

With this option exercise in hand, work on the F-16 radar contract will now continue through December 2022. Including today's option exercise, the total value of Northrop's work to be done on the underlying contract has reached $553.4 million.

Shares of Northrop Grumman fell 2% to close at $329.38 in Tuesday trading, somewhat less than the 2.8% decline seen on the S&P 500. The shares did not increase in after-hours trading despite announcement of the contract at 5 p.m. ET.

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