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Northrop Gets $113.7M DoD Contract

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Northrop Grumman Corporation (NOC) numbered among the 20 awardees receiving contracts from the Department of Defense (DoD). The Northrop contract for $113.7 million calls for Full Rate Production of five E-2D Advanced Hawkeye Lot 2 airborne early warning aircrafts. In total, the DoD has provided contracts worth $717.7 million.

Under this advance acquisition fixed price contract Northrop will be financed for purchase of long-lead materials that are required to begin full production of these aircrafts. The task is expected to be completed by Mar 2014.
In Feb 2013, Northrop Grumman received approval from the Office of the Secretary of Defense (“OSD”) for full-rate production as the aircraft has proved to be suitable and effective for operations.

Designed and manufactured by Northrop Grumman, the E-2D Advanced Hawkeye is the newest variant of the E-2 aircraft platform. It comprises of high-tech radar with a two-generation leap. It also has an upgraded aircraft system that increases speed. The Advanced Hawkeye manages the Navy's warplanes by recognizing and keeping track of wanted and unwanted aircrafts while warning the seaborne fleet.

E-2D is a multi-mission platform. Through its ability to coordinate concurrent missions, E-2D can provide land force support, rescue operations, and manage a reliable communications network between widely dispersed nodes. Hawkeye’s new glass cockpit and tactical fourth operator display provide the five-person crew more flexibility in fulfilling the diversified nature of work. Moreover, its ability to work near the coastline as well as over land helps in protecting the nation’s interests.

Northrop has a strong presence in Air Force, Space & Cyber Security programs. The company’s product line is well positioned in high priority categories, such as defense electronics, unmanned aircraft and missile defense. The company is taking several initiatives to ensure further alignment with its customers' need in order to increase affordability and cost competitiveness. It is working on establishing Aerospace Design Centers of Excellence at its various centers. Going forward, growth in domestic efforts will be driven by the Navy's Triton program with international growth supported by Alliance Ground Surveillance (“AGS”) program and continuing efforts on Germany's EURO HAWK program.

Also, the company seems to be immune to some extent to defense budget cuts. In fact, the President's fiscal year 2014 budget supports some of Northrop’s key programs. For 2014, the proposed budget increased funding for Northrop’s E-2D Advanced Hawkeye by 25%, while 21 EA-18G Growlers funding got a proposal for double financing in comparison to 2013. Meanwhile funding for F-35 was re-affirmed, and programs like SBIRS, Advanced EHF and the James Webb Space Telescope, Global Hawk Block 30 and Block 40 operations were sufficiently funded. Cybersecurity is a key investment area with funding increasing by more than 20% to $4.7 billion.

The company presently retains a short-term Zacks Rank #2 (Buy). Other stocks to consider are Erickson Air-Crane Inc. (EAC), Wesco Aircraft Holdings, Inc. (WAIR) and B/E Aerospace Inc. (BEAV). While Erickson Air-Crane carries a Zacks Rank #1 (Strong Buy), Wesco Aircraft and B/E Aerospace carry a Zacks Rank #2 (Buy).

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