Northrop Wins Army Contract
Los Angeles-based leading defense contractor, Northrop Grumman Corporation (NYSE:NOC) was awarded a $388 Million Mission Command Training Contract from the Department of the Army Mission and Installation Contracting Command Center – Fort Eustis.
Per the contract Northrop Grumman will provide training and technical services to support the U.S. Army Mission Command Training Program (MCTP).
The $388.4 million cost plus award fee contract includes a one-year base with four option years. Work will be performed at Fort Leavenworth, Kansas and training facilities worldwide.
Los Angeles-based Northrop Grumman is a leading global security company providing innovative systems, products and solutions in aerospace, electronics, information systems, and technical services to government and commercial customers worldwide.
Northrop Grumman, in March 2011, separated its Shipbuilding segment through a spin-off of its subsidiary, Huntington Ingalls Industries Inc. (HII). It operates major shipyards in Louisiana, Mississippi and Virginia.
In July this year, Northrop Grumman Corporation reported weak second quarter 2011 adjusted earnings of $1.59 per share compared with the Zacks Consensus Estimate of $1.68 for the quarter. Sales for the recent quarter also decreased 9.6% to $6.56 billion, from $7.26 billion in the year-ago quarter, and were 6.0% lower than the Zacks Consensus Estimate of $6.98 billion.
The results reflect the impact of lower U.S. Department of Defense (DoD) investment outlays including announced force reductions in overseas contingency operations. The top line was also hurt by the company’s reduced participation in the Nevada National Security Site (NSTec) joint venture and delayed awards for manned aircraft programs.
NSTec was formed in 2005 as a joint venture between Northrop Grumman Corporation, AECOM Technology Corporation (NYSE:ACM), CH2M Hill, and Nuclear Fuel Services.
Northrop Grumman has a strong presence in Air Force, Space & Cyber Security programs. Its product line is well positioned in high priority categories, such as defense electronics, unmanned aircraft and missile defense.
Revenue and earnings growth continue to be driven by its strong presence in the current focus areas of cyber security, modernization of defense and homeland security assets, intelligence, surveillance and reconnaissance systems, advanced electronics and software development.
However, the positives could be offset by apprehension regarding defense cutbacks on high-cost platform programs, over-exposure to the DoD budget, lower backlog, cost over-runs and substantial exposure to missile-defense-related programs.
The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. In the near term, we would advise investors to accumulate its short-term Zacks #2 Rank (Buy) peers, like Embraer S.A. (NYSE:ERJ).