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Northrop Inks $555.6M Pentagon Deal

Zacks Equity Research

Northrop Grumman Corp. (NOC) won a contract from the Department of Defense (DoD) for the modernization of the Global Hawk unmanned aircraft system. This contract has a total value of up to $555.6 million.

Considered as one of the largest unmanned aerial vehicles (UAVs) in service of the U.S. Air Force and Navy, the Global Hawk has the capability to fly for over 32 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.

Per the latest contract − that runs through May 14, 2015 − Northrop is in charge of a wide range of operations. These include program management, engineering job, data management and streamlining of the manufacturing supply chain. The company’s work also involves designing, testing, evaluation, and retrofits on Global Hawks.

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 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 $39.4 billion at the end of the first quarter of 2013, is expected to see further upside in the near future through UAV platforms, including Broad Area Maritime Surveillance, Fire Scout and Navy Unmanned Combat Air System.

Recently, the company delivered strong first quarter 2013 results. The company’s top and bottom line surpassed the corresponding Zacks Consensus Estimate primarily due to robust operating performance as well as a lower share count.

Northrop Grumman currently has a Zacks Rank #2 (Buy).

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