Defense stocks are some of the more reliable stocks around. The reason, while not particularly pleasant to consider, is that humanity is almost always looking for new ways to blow each other up.
That creates a self-perpetuating competition whereby one company or government develops a new weapon, someone else develops a counter, then the original party has to find a way to circumvent that counter, and so on and so forth.
That brings us to Northrop Grunman Corporation (NYSE:NOC) and its new partnership with the U.S. government to counter hypersonic threats. The company is banking on the future of this technology being instrumental to national defense, thereby benefiting Northrop Grunman stock immensely.
Northrop Grunman is working on “solutions to detect, track, and defeat modern hypersonic missiles in various phases of flight.” In this effort, it is partnering with the U.S. government (read: getting paid vast sums of money from virtually endless coffers). (Source: “Counter Hypersonics Mission,” Northrop Grunman Corporation, last accessed November 20, 2019.)
In other words, the company has a very reliable stream of recurring revenue that will help keep profits high for the foreseeable future.
After all, as stated above, with each breakthrough in this industry, a counter is necessary (unless world peace breaks out, and that seems far off).
These military tech stocks don’t even need to necessarily have the right technologies; the companies just need to be working in this field. We’ve seen countless examples of near-endless spending on military projects that either don’t fulfill their original promise or need years and years in order to become viable.
“As the U.S. government seeks innovative ways to address these threats, a mix of existing and new technologies are required in several areas, including space sensing, interceptors, directed energy, electronic warfare, cyber, and battle management, command, control and communications,” said Northrop Grunman Corporation.
“As an industry leader in missile defense with decades of experience, Northrop Grumman has the people, talent, and technology required to deliver a layered defense from left-of-launch to detection, tracking, and successful intercept.” (Source: Ibid.)
Getting in on the future of military tech could net huge gains for investors. NOC stock has already rewarded investors with almost 50% year-to-date gains. Northrop Grunman stock continues to impress as one of the strongest military tech stocks around, and it could just be getting started.
NOC Stock Prediction
One of the real features of Northrop Grunman stock, as outlined above, is that Northrop Grunman Corporation is poised to see recurring revenue for years to come.
After all, the military tech industry is a cyclical one. As such, this is a company that is better suited than most to survive recessions and other typical market obstacles that could derail other companies.
For instance, during a recession, the average consumer may cut back on buying the latest smartphone that holiday season, but a country can hardly forgo its defense spending.
Not to mention that defense spending—especially in the U.S.—is typically one of the hardest budgets to cut, if history is any indication. If anything, it typically grows. And that’s another huge benefit of being in the military tech business: you deal with governments.
Their endless well of money is fantastic for corporations with goods to sell. Not to mention that they typically are willing to pour in tons of resources when it comes to defense spending.
With all that in mind, the NOC stock forecast is rather bright.
Consider the company’s latest quarterly report as well. Its net awards totaled $10.1 billion, with its backlog increasing to $65.0 billion. (Source: “Northrop Grumman Third Quarter 2019 Financial Results,” Northrop Grunman Corporation, October 24, 2019.)
Meanwhile, Northrop Grunman’s sales increased five percent in the company’s four main sectors (aerospace systems, innovation systems, mission systems, and technology services) to almost $8.5 billion.
Diluted earnings per share hit $5.49 while cash from operations reached $1.1 billion. The company also has a free cash flow of $882.0 million.
The combination of growth and eyes toward future innovation in an especially lucrative and reliable sector make Northrop Grunman stock worth watching.
My NOC stock prediction sees it easily rising another 50% in 2020 if the company can stay the course and continue to innovate and provide solid numbers in its financial reports.
Military tech stocks are one of the most reliable sectors to get involved in. With juicy government contracts that are typically self-renewing, and a system designed to create more work for companies operating in this space in perpetuity, there are few sectors as reliable as this one.
Northrop Grunman Corporation is a prime example of a military tech company that has both a solid footing in the present and eyes on the future.
Northrop Grunman is looking to be among the top companies involved in hypersonic weapons defense systems, a business move that could result in big profits for the company as that sector develops.
Overall, I’m very bullish on NOC stock.