Northrop Grumman Corporation
) was awarded a $88 million cost plus fixed fee contract for
logistics support for the RQ-4 Global Hawk fielded Block 30
weapon system. The location of the performance is San Diego,
California. Work on the contract is expected to be completed by
October 12, 2013.
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 acquisitions. In the
second quarter of 2012, the company repurchased 4.9 million
shares for approximately $295 million. At the end of the first
half of 2012, the company had a low long-term
debt-to-capitalization of 26.5%. Total long-term debt was
approximately $3.9 billion, with no significant maturities in the
near term, along with cash holdings of $3.1 billion.
Northrop Grumman is expected to release its third-quarter 2012
results on October 24, 2012. The Zacks Consensus Estimates for
third-quarter 2012 and fiscal 2012 are currently pegged at $1.70
per share and $7.24 per share, respectively.
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. The positive case for Northrop Grumman stems from
revenue growth across the board and a broad diversification of
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 repurchase
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.
Like its peers,
General Dynamics Corporation
), the company presently retains a short-term Zacks #3 Rank
(Hold) that corresponds with our long-term Neutral recommendation
on the stock.
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