Northrop Grumman Corporation
(
NOC
) was awarded by the U.S. Air Force a 30-month, $540 million
contract for Total System Support Responsibility (
TSSR
) of the E-8C Joint Surveillance Target Attack Radar System (Joint
STARS) fleet.
Per the contract Northrop Grumman would provide the 17-aircraft
Joint STARS fleet with integrated logistics support. The Joint
STARS fleet is the only all-weather, long-range, real-time, wide
area surveillance and battle management and command and control
weapons system in the world. Joint STARS is the only platform in
the U.S. arsenal that combines accurate wide-area moving target
detection with synthetic aperture radar imagery to locate, classify
and track ground targets in all weather conditions from standoff
distances.
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. However,
these are offset by apprehension 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.
The downside in the value of defense primes in general and
Northrop Grumman in particular is an extension of the tepid
recovery rate of the U.S. economy, raising fears of further
deterioration of the domestic fiscal situation. The apprehension is
fueled by Defense Secretary Leon Panetta's ambitious plans to save
$450 billion over the next ten years. We expect the Euro-area
crisis to continue to cast a spell over the financial markets. The
heightened uncertainty may contribute to sharply lower equity
prices and wider risk spreads. We feel this will invariably lead to
slow consumer spending and the general pull-back from risk may
affect government spending on defense.
Northrop Grumman presently retains a short-term Zacks #3 Rank
(Hold) that corresponds with our long-term Neutral recommendation
on the stock.
Based in Los Angeles Northrop Grumman supplies a broad array of
products and services to the U.S. Department of Defense (DoD),
including electronic systems, information technology, aircraft,
space technology, and systems integration services. Some of
its main competitors include
General Dynamics Corporation
(
GD
) and
Lockheed Martin Corporation
(
LMT
).
LOCKHEED MARTIN (
LMT
): Free Stock Analysis Report
NORTHROP GRUMMN (
NOC
): Free Stock Analysis Report
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