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Defense major Northrop Grumman Corp. (NOC - Analyst Report) succeeded in clinching one of the largest contracts awarded on Sep 9, 2013 by the U.S. Department of Defense (DOD). Of the total $7.42 billion worth of contracts awarded yesterday, Northrop won a $219.1 million firm-fixed and cost-type contract from the U.S. Air Force for follow-on production of its Joint Threat Emitter (“JTE”). The work on the latest contract is slated to be finished by Mar 2016.

This is a partial foreign military sales contract that allows Northrop to manufacture JTE and related drawings, technical orders, retrofit kits and software for Air Force pilots. JTE is a multi-threat, high-fidelity simulator with enhanced multi-functional threat potential that can be economically reconfigured to simulate emerging threats globally.

It can realistically simulate multiple types of surface-to-air missile (SAM) and anti-aircraft artillery (AAA) radar systems and also perfectly simulate enemy integrated air defense systems to train combat aircrew to defeat or avoid SAM and AAA threats in a war-like training environment.

Despite the threat of budget sequestration, the defense primes have experienced a generous flow of large as well as small-sized contracts. The positive case for Northrop stems from revenue growth across the board, a broad diversification of programs, and an order backlog of approximately $37.7 billion at the end of second quarter 2013.

Again, Northrop might profit from the current Syrian conflict as President Obama’s stand for a military strike against Syria is increasingly garnering support from both Republican and Democratic parties. Additionally, Japan’s proposed increase in its defense budget in 2014 might prove to be a boon for Northrop as the country is a key customer.

Presently, Northrop carries a Zacks Rank #2 (Buy). Other well-placed players in the sector are Lockheed Martin Corp. (LMT - Analyst Report), Raytheon Co. (RTN - Analyst Report) and B/E Aerospace, Inc. (BEAV - Snapshot Report), all with a Zacks Rank #2 (Buy).

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