Northrop Grumman Corporation (NOC), The Boeing Company (BA): Will Obama Help Increase Foreign Drone Sales?

However, because of the MTCR, the U.S. advantages haven’t translated to sales. The MTCR affectively limits foreign UAS sales to smaller, lower-cost systems such as The Boeing Company (NYSE:BA)‘s ScanEagle.

At last year’s Washington Aero Club meeting, Wes Bush, Northrop Grumman Corporation (NYSE:NOC)’s CEO, stated, “Today, the U.S. is struggling to sell unmanned aircraft to our allies while other nations prepare to jump into the marketplace with both feet.”

The sky’s the limit
Clearly, the MTCR is putting a kink in defense companies’ UAV sales. However, in 2009, President Obama announced his desire to overhaul current controls on weapons exports in what is known as the Export Control Reform initiative. This initiative doesn’t specifically address MTCR controls, but P.J. Hart, director of international affairs for the Aerospace Industries Association, said that “through the export reform efforts the United States is looking at all the items it has regulatory control over.” By extension, that includes UAS regulations.

More pointedly, in regard to foreign UAS sales, the Export Control Reform is expected to spark an internal dialog that could make it easier for companies to overcome the “presumption of denial” by easing the resistance of such sales from the DOD, State, and finally, Congress. That, in turn, could increase U.S. companies’ competition for foreign UAS sales.

What to watch
The talk to reform UAS exports could go either way, but if it does turn in favor of eased foreign UAS sales, it would be welcome news for UAS manufacturers, and in particular Northrop Grumman Corporation (NYSE:NOC) and General Atomics. After all, $60.6 billion in potential sales isn’t exactly chump change. And considering Northrop Grumman Corporation (NYSE:NOC) sells the RQ-4 Global Hawk for an estimated $30 million apiece, this will probably help its bottom line. Moreover, an increase in Global Hawk sales would also benefit subcontractors Raytheon Company (NYSE:RTN), which supplies the sensors; The Boeing Company (NYSE:BA), which supplies the carbon fiber wing; and L-3 Communications Holdings, Inc. (NYSE:LLL), which supplies the communications system. Consequently, the Obama administration’s Export Control Reform initiative is good news for defense contractors, and something investors should continue to monitor.

The article Will Obama Help Increase Foreign Drone Sales? originally appeared on Fool.com and is written by Katie Spence.

Fool contributor Katie Spence owns shares of Northrop Grumman. Follow her on Twitter: @TMFKSpence. The Motley Fool owns shares of L-3 Communications Holdings, Northrop Grumman, and Raytheon.

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