Northrop Grumman Corporation (NOC), Google Inc (GOOG): The Best Investments for the Coming Drone Craze

Textron purchased AAI Corp., the manufacturer of the Shadow reconnaissance vehicle, in 2007. The Shadow is heavily in use by the U.S. military, with over 100 of them currently in service. And Textron is planning on using its expertise in helicopter technology to bring enhanced mobility to drones. The company has develop a modified Shadow with a rotor that allows the vehicle to make vertical takeoffs. This would be very useful in the commercial market because it does not require runway space to operate.

Saving money with drones

Fred Smith, CEO of FedEx Corporation (NYSE:FDX), has gone on record saying that drones will be a part of his company’s business strategy. “Unmanned cargo freighters have lots of advantages for FedEx: safer, cheaper, and much larger capacity.” Being able to use unmanned vehicles, FedEx will be able to reduce its quarterly $10 billion operating expenses and increase its margins.

FedEx is a logistics company, and Smith’s early foray into the industry will reap major benefits for the company. This will come in the form of new services drones can provide that have not even been imagined yet. FedEx will be able to guide leaner supply chain operations and make money in the process. Package shipments, and thus revenue, rise and fall with the economy, and a leaner FedEx is a meaner money-making FedEx.

Bottom line

Look for FedEx to make leaps in drone technology early. Its business is ready-made for the FAA decision to allow commercial drones. Google Inc (NASDAQ:GOOG) wants to be involved in drones, but its hard to make the connection yet how they will make money. They are looking for ideas to keep growing, and drone tech is a part of that search. Don’t bet on them getting in on the game early.

Both Textron and Northrop Grumman Corporation (NYSE:NOC) are prepared for large-scale commercial drone deployments. These companies are looking for a boost in revenue and diversification outside of government contracts. They both face stiff competition from smaller and more nimble upstarts in the industry, but having scale in a market like this will be helpful. They both have experience and connections working with the government, which might be important early on as the FAA tweaks its regulations based on public perception.

Daniel Cawrey has no position in any stocks mentioned. The Motley Fool recommends FedEx and Google. The Motley Fool owns shares of Google, Northrop Grumman, and Textron.

The article The Best Investments for the Coming Drone Craze originally appeared on Fool.com.

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