Northrop Wins Contract Extension
Northrop Grumman Corp. (NOC) has received a modification contract to a previously awarded cost-plus-fixed-fee contract to provide additional operations and maintenance support for MQ-4C Triton under the Navy's Broad Area Maritime Surveillance (:BAMS) program.
The current contract is worth $27.6 million and is slated for completion by May 2014. MQ-4C Triton is an unmanned aircraft system (:UAS) that provides real-time intelligence, surveillance and reconnaissance (ISR) missions extensively over ocean and coastal regions.
Akin to Northrop’s Global Hawk UAS design, the Triton is able to fly 24 hours at a time and provide a full 360 degrees of oversight of the area. The U.S. Navy expects to procure a total of 68 Tritons, in a contract expected to be worth up to $1.2 billion.
Falls Church, Va.-based Northrop Grumman 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 for Northrop stems from revenue growth across the board and a broad diversification of programs. Also, its product line in high priority categories, such as defense electronics, unmanned aircraft and missile defense, gives Northrop an edge over competition.
Recently, the defense major posted second quarter earnings that came above our expectation and the year-ago figure, buoyed by a lower share count and strong operating performance.
Although the company’s lower backlog at the end of the second quarter is a cause of concern, we are upbeat on the company’s strong operational performance. We believe Northrop’s backlog is expected to see an upside in the near future through unmanned aerial vehicle (:UAV) platforms, including BAMS, Fire Scout and Navy Unmanned Combat Air System (:UCA).
Northrop Grumman currently carries a short-term Zacks #2 Rank (Buy). Other defense counterparts worth considering at the moment are Zacks Ranked #1 (Strong Buy) Alliant Techsystems Inc. (ATK) and Zacks Ranked #2 (Buy) peers Lockheed Martin Corp. (LMT) and Huntington Ingalls Industries (HII).
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