Defense contractor Northrop Grumman Corp. (NYSE: NOC) announced Tuesday that the company had won a U.S. Air Force contract for $13.3 billion for the engineering and manufacturing development phase of the nation’s Ground Based Nuclear Deterrent (GBSD) program.
The eight-and-a-half year contract includes weapon system design, qualification, test and evaluation, and nuclear certification. The company then expects to begin production and delivery of a modernized nuclear weapon force with initial operational capability beginning in 2029.
The contract award was a foregone conclusion because Northrop and its partners were the only bidders remaining for the contract. Lockheed Martin Corp. (NYSE: LMT) was eliminated from the bidding in 2017 and Boeing Co. (NYSE: BA) withdrew last year. Lockheed later joined the Northrop team and is among the hundreds of companies both large and small that will work on the GBSD program.
According to Northrop’s announcement, more than 10,000 people from all over the United States will be involved in the program with much of the work based in Roy and Promontory, Utah, near Hill Air Force Base.
The GBSD program replaces the country’s aging Minuteman III intercontinental ballistic missile (ICBM) system and is the ground-based leg of the U.S. nuclear triad. Boeing was the original builder of the Minuteman III ground-based system.
The Pentagon’s fiscal year 2021 budget included more than $45 billion to modernize the U.S. missile defense force, a program begun in 2017 under the Obama administration that was originally estimated to cost some $400 billion by fiscal year 2026.
In January 2019, the Congressional Budget Office (CBO) revised its middle-term cost estimate to $494 billion between 2019 and 2028. Spending through 2046 could total $1.2 trillion, according to a CBO report from October of 2017.
Following the Defense Department’s elimination of Lockheed from contention for the contract in February 2017, Northrop’s stock rose to an all-time high of around $344 a share. At Tuesday’s close, the stock traded at $334.56.
That’s why shares have moved higher by around 1.3% Wednesday morning to trade at $338.88, in a 52-week range of $263.31 to $385.01. The consensus 12-month price target on the stock is $397.26.