Northrop Grumman: A Top Pick for Military Drone Investing Today

We recently released a list of the 10 Top Military Drone Stocks to Invest in Currently In this piece, we'll examine how Northrop Grumman Corporation (NYSE:NOC) measures up against some of the top contenders in the drone stock market.

Contemporary warfare is swiftly transforming beyond the traditional realms of infantry, armored vehicles, and combat aircraft. Now, swarms of unmanned aerial vehicles (UAVs), driven by artificial intelligence, dominate the airspace, capable of precisely hitting adversary objectives. This shift in war tactics has obscured the distinction between human-operated forces and automated systems, necessitating a critical review of military strengths and strategies.

READ ALSO: 10 Nations Boasting the Largest Fleets of Military Drones Worldwide and Goldman Sachs Recommended Defense Stocks: Leading 12 Picks .

In recent years, there has been a significant increase in the demand for drones as various nations utilize Unmanned Aerial Vehicles (UAVs) extensively for gathering intelligence, conducting reconnaissance missions, performing surveillance activities, and executing targeted operations. These airborne systems provide an unparalleled overhead perspective of combat zones, complicating movements and concealment efforts by adversaries within these areas.

Unmanned aircraft emerged as a significant element in the clash over the Nagorno-Karabakh area involving Azerbaijan and Armenia back in 2020. These devices have also cast shadows over numerous urban centers throughout the ongoing Russo-Ukrainian War, prompting analysts to view them as an emerging challenge for air defenses.

For nearly a hundred years, the U.S. has utilized unmanned aerial vehicles (UAVs), starting with their deployment during World War II and continuing into recent conflicts such as those in Afghanistan and Iraq. In 2023, the Department of Defense introduced Project Replicator, aimed at producing large numbers of 'attritable autonomous systems' within the coming one-and-a-half to two-year period. Additionally, the Air Force is working on drone escorts designed to accompany both fighter planes and bombers through the Collaborative Combat Aircraft (CCA) project. This year, in March, they revealed prototypes of the initial pair of these CCA aircraft.

Nevertheless, specialists in military defense see the increasing availability of drones as a security risk, with U.S. forces facing more attacks from non-government groups in the Middle East. Officials in Washington are also concerned that China might take inspiration from Russia’s tactics during the Ukraine conflict and carry out comparable assaults on American assets in the Asia-Pacific region.

A significant amount of effort is being directed towards protecting nations from the dangers presented by unmanned aerial vehicles (UAVs). In October 2024, the Department of Defense (DoD) granted a $250 million contract to Anduril Industries for developing systems to defend against drone assaults targeting U.S. military personnel. As part of this agreement, the country will be supplied with 500 recoverable Roadrunner interceptors—drones designed for reuse that either neutralize approaching drones or return safely to the ground when not required for engagement.

Given this introduction, let's move on to the lineup of top drone stock picks for investment.

Aircraft engineering specialist examining a small-scale airplane engine within an industrial facility.

Methodology

We took stock samples from ETFs that have investments related to military drones and also referred back to our earlier pieces on this topic. Our selection encompassed both companies solely focused on manufacturing military drones and larger defense firms involved in drone initiatives. Next, out of these picks, we chose the top 10 stocks which attracted the most hedge fund backers, using data sourced from Insider Monkey’s repository of more than 1,000 leading hedge funds for the fourth quarter of 2024.

Why do we pay attention to the stocks that hedge funds amass? It’s straightforward: our analysis indicates that mimicking the leading stock choices from premier hedge funds allows us to exceed market performance. Each quarter, our quarterly newsletter’s approach chooses 14 small-cap and large-cap stocks and has achieved a return of 373.4% since May 2014, surpassing its benchmark by 218 percentage points. see more details here ).

Northrop Grumman Corporation (NYSE: NOC )

Number of Hedge Fund holders: 54

Northrop Grumman Corporation (NYSE:NOC), a global giant in defense contracting, produces the advanced B-21 Raider, which is a long-range, stealth strategic bomber. Additionally, they hold a prominent position in autonomous aerial technology and have created significant unmanned aircraft such as the RQ-4 Global Hawk and MQ-4C Triton for military use.

This past March, Northrop Grumman Corporation (NYSE:NOC) secured a $267 million deal from the U.S. Navy for the construction of two extra MQ-4C Triton unmanned aircraft systems. This contract aligns with the navy’s strategy to expand their fleet to include 27 such vehicles aimed at enhancing intelligence, surveillance, and reconnaissance operations. Additionally, under the terms of the accord, the corporation will deliver a primary operational hub along with maintenance assistance to the naval authorities.

Northrop Grumman Corporation (NYSE:NOC) has been tasked with managing a $387 million foreign military sales contract from the Department of Defense (DoD), which they received in April 2024. This contract supports Italy, Japan, and South Korea in maintaining their RQ-4 Global Hawk drones. Additionally, the initial Triton unit was handed over to Australia back in June; deliveries for the subsequent two units are scheduled before the end of this year.

On April 22, Northrop Grumman Corporation (NYSE:NOC) announced financial outcomes for the initial quarter of fiscal year 2025. The company recorded revenues totaling $9.5 billion, marking an approximate decrease of 7% compared to the same period last year, primarily because of various contract postponements and the scheduling of materials deliveries. For this particular quarter, net income amounted to $481 million, equivalent to $3.32 per diluted share, which represents a significant decline when contrasted with the previous year’s figures: $944 million, translating into $6.32 per diluted share during the first quarter of 2024.

Following these results, the corporation's stock has declined. Even though this presents an obstacle, financial experts generally recommend buying Northrop Grumman Corporation (NYSE:NOC), projecting a possible increase in share value by 18%. There continues to be robust investor confidence. As recorded in Insider Monkey’s records from quarter four of 2024, 54 hedge funds owned shares in the firm. This makes it among the top choices for purchasing drone-related equities at present.

Overall, NOC ranks 5th Among the top 10 best military drone stocks to consider right now, we recognize their appeal; however, we firmly believe that AI stocks offer superior prospects for achieving substantial gains more rapidly. One particular AI stock has shown growth year-to-date despite many well-known AI stocks dropping approximately 25%. Should you seek an AI investment with stronger potential compared to NOC yet trading below five times its earnings, explore our detailed analysis on this opportunity. cheapest AI stock .

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Disclosure: None. This piece was initially published at Insider Monkey .