Northrop Grumman Corporation
) has entered into an agreement with PT Industri Telekomunikasi
Indonesia and the Research Centre for Electronics and
Telecommunications of The Indonesian Institute of Sciences. The
company has signed this Memorandum of Understanding during the
Sixth National Radar Seminar at Bali in Indonesia.
Per the agreement, Northrop Grumman, with its advanced research
and engineering and technical knowledge, will assist its Indonesian
counterparts to develop and explore ground-based radar
opportunities in the country. The deal will help the Indonesian
government to secure its borders and also enhance its air
surveillance control system.
In order to extend and strengthen Northrop Grumman's defense
pact with Indonesia and to understand its radar-based requirement,
the company is planning to participate in the upcoming Indonesian
ground-based radar competition.
We view Northrop Grumman as a defense behemoth with a broad
diversification of programs including a stronghold in the
Electronic Systems segment, particularly in radars. The company's
latest invention is AN/TPS-78. This modern advanced radar has high
power transistor technology and can be used in unfavorable
In January 2012, the company and its peer
Lockheed Martin Corporation
) signed an agreement worth $181 million
with the U.S. Army. This contract included the first international
purchase of 15 Block III LONGBOW Fire Control Radar systems by
Taiwan. The companies also delivered 18 Radar Electronic Units, 14
Unmanned Aerial System Tactical Common Data Link Assembly systems
and spares to the U.S. Army's AH-64D Block III Apaches.
We believe that the company is well positioned with a strong
presence in the areas of cyber security, defense modernization and
homeland security systems. Intelligence, surveillance and
reconnaissance systems, sophisticated electronics and software
development have also been Northrop Grumman's forte.
This expertise will come in handy in the current environment,
given the focus of recent defense budgets. We expect this to
translate to additional revenue and earnings growth for Northrop in
the near term.
At the same time, we are concerned about the company's overt
dependence on government contracts. We see a lower trend in order
backlog in some of the prominent programs like the Global Hawk and
the F-35 Joint Strike Fighter due to U.S. defense budget
The prevailing Euro-zone crisis, lower backlogs, cost overruns
and reductions in Afghanistan and Iraq military deployments are
reasons for concern. As a result, Northrop Grumman currently
retains a Zacks #4 Rank, which translates into a short-term Sell
Northrop Grumman is slated to release its first-quarter 2012
numbers on April 25, 2012. The Zacks Consensus Estimates for the
first quarter 2012 is currently at $1.59 per share.
Northrop Grumman Corporation is a leading global security
company providing innovative systems, products and solutions in
aerospace, electronics, information systems, and technical services
to government and commercial customers worldwide.
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