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Northrop Gets $114M Air Force Contract - Analyst Blog

Posted
11/11/2013 5:50:00 PM
By: Zacks.com
Referenced Stocks:BA;ISR;LMT;NOC;RTN

Northrop Grumman Corp. ( NOC ) clinched a $114.0 million U.S. Air Force contract for building three additional high-flying RQ-4 Global Hawk unmanned aircraft systems ("UAS") and associated sensors. The contract is expected to run through 2015.

The deal entails procurement of long lead items related to three Block 30 aircraft which include three advanced integrated sensor suites, three airborne signals intelligence payload ("ASIP") as well as the installation of two ASIP retrofit kits on previously acquired aircraft.

The intelligence, surveillance and reconnaissance (ISR) aircraft enables the military to receive high-resolution imagery, survey vast geographic regions and identify ground targets.

The Global Hawk has the ability to fly for long periods at altitudes of up to 60,000 feet and is suitable to take on diverse ISR missions. The Global Hawk is designed to carry varied payloads and also offer airborne communication and information sharing assistance to military forces under challenging circumstances. 

Besides the military, Global Hawk's ISR application has shown promising results in other fields too. The National Aeronautics and Space Administration has employed Global Hawks in scientific and environmental research endeavors like the study on tropical storms over the Atlantic Ocean.

The current defense budget allows continued investment in key technologies aimed at enhancing the country's future defense capabilities including ISR systems. Thus, the Global Hawk is expected to feature largely in the Department of Defense's acquisition plans. The aircraft procurement program was allotted $45.4 billion in the 2014 budget, marginally less than the previous fiscal year.

We believe Northrop's diversified business will continue to fetch high-value contracts in the upcoming quarter. The company recently secured a sizeable $178 million contract for the sustainment of the entire E-8C Joint Surveillance Target Attack Radar System aircraft program. 

With the U.S. focused on addressing the growing issues of counter terrorism worldwide, we anticipate Northrop's order book to improve next year. Currently, the company carries a Zacks Rank #2 (Buy).

Other defense operators looking good at the moment include Zacks Ranked #1 (Strong Buy) Raytheon Co. ( RTN ) and Zacks Ranked #2 Lockheed Martin Corp. ( LMT ) and The Boeing Co. ( BA ).



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