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NOC Wins Contract Modification

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Northrop Grumman Corp. (NOC) won a modification contract from the U.S. Air Force for its Global Hawk unmanned aircraft system. This contract has a total value of $71 million.

Global Hawk is an unmanned aircraft system and has the capability to fly for over 30 hours at an altitude of more than 60,000 feet and boasts of near-real-time intelligence surveillance and reconnaissance/ISR and efficient communications relay competencies. In fiscal 2012, Global Hawk operated at a mission-capable rate of nearly 78% that surpassed the U.S. Air Force's prerequisite for 19 successive months.

The success of this unmanned aircraft system has led to the extension of the existing contract. Per the agreement, the company will provide program management, engineering, and flight operations support to complete Lot 10 aircraft and sensor deliveries.

The deliveries include two Block 30 Global Hawk aircrafts, two more advanced Block 40 drones, and three ASIP retrofits. Northrop expects all work on this contract modification to be completed by the end of 2014.

Northrop Grumman is the fourth largest U.S. defense contractor behind The Boeing Company (BA), Lockheed Martin Corporation (LMT), and General Dynamics (GD) in terms of full year 2012 revenue.

The company has a strong presence in Air Force, Space & Cyber Security programs. Northrop’s product line is well positioned in high priority categories, such as defense electronics, unmanned aircraft and missile defense.

The company’s backlog, which stood at approximately $40.8 billion at the end of 2012, 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).

However, these positives will likely be 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 the Afghanistan and Iraq operations.

Northrop currently carries a Zacks Rank #3 (Hold).

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