Northrop Grumman Corporation NOC has won three contracts from the U.S. Department of Defense (“DoD”) on Mar 25, 2015 worth $112.6 million.
The contract with the highest value, worth $48.7 million, is a modification contract for the continuation of contractor logistic services for the Hunter unmanned aircraft system. Work on the contract is expected to be over by Mar 29, 2016 and the contracting activity is Army Contracting Command, Redstone Arsenal, AL.
The second-highest contract in terms of value, worth $42.1 million, is a U.S. Navy modification contract. Per the contract, Northrop will supply depot-level maintenance and services for the support of 44 F-5N/F aircraft. The Support services comprise of aircraft inspections, repairs, overhauls, modification and engineering support.
The last contract won by Northrop is a modification contract worth $21.8 million from the Missile Defense Agency. The company will provide services for the maintenance of the Space Tracking and Surveillance system.
On a global scale, demand for weapons has been going through a gradual transition. Instead of guns and ammunition, we now see rising demand for sensors, missiles and next-generation intelligence, surveillance and reconnaissance (“ISR”) technologies.
With rising security threats, the U.S. government has realized the need for ISR technologies and has shifted its emphasis on high-tech intelligence equipment. The FY16 defense budget proposed by the Obama administration has put due emphasis on ISR.
Moreover, the Obama administration recently unveiled a new policy for the export of U.S. military drones. The policy reveals the unprecedented popularity of drones or unmanned aircraft which have made them indispensable for countering terrorism.
Northrop continues to focus on developing new innovative products. It is the proud owner of the popular Global Hawk, an unmanned system with the ability to transform itself into an operational weapons system when required. Its timely shift in focus toward ISR technologies will thus allow the company to witness huge gains, going forward.
Northrop also boasts of other products like E-2D Advanced Hawkeye, which provides 360-degree surveillance at all times. The technology and gadgets fitted in this aircraft increases its visibility for targets farther away. Recently, the Japanese Ministry of Defense selected Northrop’s E-2D Hawkeye aircraft to strengthen its own ISR capabilities.
Northrop increased its R&D investments by over 12% year over year in 2014 to $569 million. Backed by its persistent focus on investments in technological and service upgrades, Northrop will likely be well positioned amid the changing needs of the defense landscape, going forward.
The company expects to maintain the positive momentum and projects its 2015 earnings in the range of $9.20–$9.50 per share, higher than $8.93 earned in 2014.
Northrop currently has a Zacks Rank #2 (Buy). Other favorably-placed stocks in the same sector include Huntington Ingalls Industries, Inc. HII, Spirit AeroSystems Holdings, Inc. SPR and Rockwell Collins Inc. COL. While Huntington Ingalls sports a Zacks Rank #1 (Strong Buy), Spirit AeroSystems and Rockwell Collins has the same Zacks Rank as Northrop.
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