Northrop Grumman Corporation
) has received a total of three contracts − two modifications and
one fresh − from the U.S. Department of Defense (DoD). The total
deal was valued at $55.5 million.
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Under the first modification contract, worth $24.5 million, the
company will boost the ceiling value on a previously awarded
cost-plus-incentive-fee, firm-fixed-price Ground/Air
Task-Oriented Radar (G/ATOR) Engineering contract from the U.S.
Marine Corps. This is mainly intended to cover the expected rise
in costs and pay for the manufacturing development phase. Of the
total amount, $21.1 million is allotted for the engineering and
manufacturing development phase, while the remaining $3.4 million
for production engineering support.
G/ATOR is a new mobile, three-dimensional, short-to-medium-range
tactical radar system being developed by the U.S. Marine Corps.
It is intended to provide the Marines with improved capabilities
to detect, track, and provide target quality data to engage
hostile aircraft, cruise missiles, unmanned air vehicles,
rockets, mortars, and artillery. It will also provide dynamic air
traffic control capabilities to increase the safety of Marine
Corps air operations. Northrop's work on this phase of the
contract is expected to be completed by Apr 25, 2014.
The second modification contract calls for Northrop to supply
engineering and production planning services for mission packages
that will be deployed from and integrated with the littoral
combat ship. This $19.4 million worth modification contract is
slated to be completed by the middle of next year.
The company won an $11.6 million new fixed-price
indefinite-delivery/indefinite-quantity (IDIQ) contract in order
to manufacture, test, integrate, qualify and deliver an improved
version of laser configuration. This is to be used in the
Electro-Optical Third Generation Console for Advanced Targeting
Forward Looking Infrared (FLIR) systems. This system will be
installed on the U.S. Navy's F/A-18 E/F fighter jets and SH-60
Seahawk helicopters. Initially Northrop will provide the Navy
with two prototype units of the upgraded laser and subsequently
it will supply 102 upgraded units for installation. Work is
expected to be wrapped up by Jun 2016.
Northrop has a long-standing business association with the U.S.
defense establishments. The company is flooded with a number of
contracts from several government establishments. It had a total
backlog of $39.4 billion at the end of first-quarter 2013. In May
2013, Northrop won a contract, worth $555.6 million, from the DoD
to upgrade the Global Hawk.
The company's backlog will likely see further upside in the near
future through its strong focus areas of cyber security,
modernization of defense and homeland security assets,
intelligence, surveillance and reconnaissance systems, advanced
electronics and software development. Additionally, the proposed
25% increase in Northrop's funding in the 2014 budget would
encourage future opportunities.
Northrop currently has a Zacks Rank #2 (Buy). Other stocks in the
sector that also appear promising include
Erickson Air-Crane Inc.
The Boeing Company
Wesco Aircraft Holdings, Inc.
). While Erickson retains a Zacks Rank #1 (Strong Buy), Boeing
and Wesco Aircraft carry a Zacks Rank #2 (Buy).