Northrop Grumman Corporation
) was awarded a three-year contract to operate its central repair
facility in Topeka, Kansas by the U.S. Postal Service. The
program provides repair services for the Postal Service mail
processing equipment, including electronic, mechanical and
hydraulic equipment as well as reverse engineering and
fabrication services. The contract is worth more than $30
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
third quarter of 2012, the company repurchased 4.4 million shares
for approximately $290 million. At the end of the first nine
months of 2012, the company had a low long-term
debt-to-capitalization of 27.0%. Total long-term debt was
approximately $3.9 billion, with no significant maturities in the
near term, along with cash holdings of $3.5 billion.
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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