Northrop Gets Air Force Contract - Analyst Blog

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Los Angeles-based leading defense contractor, Northrop Grumman Corporation ( NOC ) was awarded by the U.S. Air Force the Air and Space Operations Center (AOC) Weapon System (WS) modernization program with an initial award of $120 million. The contract has a potential value of $504 million over eight years, if all options are exercised.

AOC WS is the command and control center for planning, executing and assessing joint air operations during a contingency or conflict. Under the contract from the Electronic Systems Center, Hanscom Air Force Base, Massachusetts, Northrop Grumman will modernize the AOC to enable greater battle space awareness and more effective, dynamic planning and execution.

AOC WS program objectives include improving the speed of command by automating information exchange, accelerating the integration of warfighter capabilities and significantly reducing lifecycle costs. Tasking under the entire contract includes design, integration, test and delivery of a network-centric infrastructure and mission applications.

Los Angeles-based Northrop Grumman Corporation is one of the largest defense contractor in the U.S. The company 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.

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 positive case for Northrop Grumman stems from revenue growth across the board and a broad diversification of programs. The company'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).

Northrop Grumman's total order backlog at the end of fiscal 2011 stood at $39.5 billion compared with $46.8 billion at fiscal-end 2010. The lower trend in order backlog is expected to continue in 2012 as some of the prominent programs of the company like the Global Hawk and the F-35 Joint Strike Fighter are coming under the scanner of U.S. budget cuts.

We maintain our long-term 'Neutral' recommendation on Northrop Grumman. The quantitative Zacks # 3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term. This is in line with its peers like General Dynamics Corporation ( GD ) and Lockheed Martin Corporation ( LMT ).


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: GD , LMT , NOC

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