Northrop Grumman Corporation ( NOC ) was awarded an
$80 million indefinite-quantity/indefinite-delivery contract for
Next Generation Command and Control Processor (NGC2P) Technology
Refresh and Link 22 development.
The Space and Naval Warfare System Command, San Diego,
California, was the contracting activity. The NGC2P system is a
tactical data link (TDL) communication processor that provides
critical real-time information about friendly and enemy activity
during combat operations.
The contract deals with obsolescence issues in the current NGC2P
system and assists system capability enhancements and new
capability insertion, such as Link 22. Under the contract, Northrop
is acquiring software and hardware system development, engineering
services and technology refresh field change kits. This deal
includes an option period, which if exercised, would bring the
cumulative value of this contract to an estimated $95 million.
Operations will be carried out in San Diego, California, which the
company expects to accomplish by December 2017.
Going forward, Northrop Grumman's strong balance sheet and cash
flows provide substantial financial flexibility and a cushion for
improving shareholder value through incremental dividend, ongoing
share repurchases and earnings accretive to acquisitions. In the
third quarter of 2012, the company repurchased 4.4 million shares
for approximately $290 million. At the end of the first nine months
of 2012, the company had a low long-term debt-to-capitalization of
27.0%. Total long-term debt was approximately $3.9 billion, with no
significant maturities in the near term, along with cash holdings
of $3.5 billion.
Falls Church, Virginia-based Northrop Grumman Corporation is one
of the largest defense contractors in the U.S. The company supplies
a broad array of products and services to the U.S. Department of
Defense including electronic systems, information technology,
aircraft, space technology, and systems integration services. These
positives for Northrop Grumman stem from revenue growth across the
board and a broad diversification of programs.
Northrop Grumman offers a strong program portfolio positioned to
take advantage of focus areas in the defense space, an improving
balance sheet and an ongoing share repurchase program. Also, its
product line in high priority categories, such as defense
electronics, unmanned aircraft and missile defense, gives Northrop
Grumman an edge over competition.
Northrop Grumman's backlog is expected to see further upside in
the near future through unmanned aerial vehicle (UAV) platforms,
including Broad Area Maritime Surveillance (BAMS), Fire Scout and
Navy Unmanned Combat Air System (UCA).
Going forward, Northrop Grumman offers a strong program
portfolio positioned to take advantage of focus areas in the
defense space, an improving balance sheet and an ongoing share
However, these are offset by apprehensions regarding defense
cutbacks on high-cost platform programs, over-exposure to the DoD
budget, lower backlog, cost over-runs and reductions in Afghanistan
and Iraq operations.
Like its peers, Embraer SA ( ERJ ) and
General Dynamics Corporation ( GD ), the company
presently retains a short-term Zacks Rank #3 (Hold) rating that
corresponds to our long-term Neutral recommendation on the
stock.EMBRAER AIR-ADR (ERJ): Free Stock Analysis
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