A Northrop Grumman Corp. (NOC) unit − Northrop Grumman Systems Corp. – recently won a defense contract to provide logistics and sustainment support services for the U.S. Air Force’s Global Hawk weapon system. The contract is worth $306.1 million.
Northrop Grumman − the maker of the U.S. military's Global Hawk drone – is entitled to provide material and services to support planning, operations and maintenance work on the Global Hawk through the end of Sep 2015. The defense major will get an obligated amount of $73.5 million in fiscal year 2014 operations and maintenance funds at the time of contract award. Work on the contract will take place at the company’s San Diego facility.
In September, Northrop Grumman received a $354 million contract from the U.S. Air Force to expand its RQ-4 Global Hawk unmanned aircraft system fleet by three aircrafts and bring in additional multi-intelligence capability. The company will furnish retrofit kits to add Airborne Signals Intelligence Payload (ASIP) sensors to two existing RQ-4s. This will bring the Air Force’s RQ-4 fleet size to 37 in 2017, while the ASIP retrofit kits are slated for delivery in late 2016 and 2017.
With a market cap of around $26.71 billion, this defense prime has seen its shares rise roughly 12.1% so far this year, outperforming the 6.5% gain of the S&P 500 over the same period.
Despite missing analyst expectations, Northrop Grumman reported higher profits in the second quarter. It raised its earnings guidance for the year to a band of $9.15–$9.35 per share from the earlier $8.90–$9.15 per share, with international sales expected to reach 13% of total sales, up from 10% in 2013. The growth will likely come from unmanned aerial vehicles and cybersecurity work.
Northrop Grumman is a Zacks Rank #3 (Hold) stock. Other companies in the defense space worth considering include Air Industries Group (AIRI), General Dynamics Corp. (GD) and Arotech Corporation (ARTX). Air Industries and Arotech sport a Zacks Rank #1 (Strong Buy), while General Dynamics holds a Zacks Rank #2 (Buy).
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