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Northrop Grumman Corporation (NOC - Analyst Report) was awarded a three-year contract to operate its central repair facility in Topeka, Kansas by the U.S. Postal Service. The program provides repair services for the Postal Service mail processing equipment, including electronic, mechanical and hydraulic equipment as well as reverse engineering and fabrication services. The contract is worth more than $30 million.

Going forward, Northrop Grumman’s strong balance sheet and cash flows provide substantial financial flexibility and a cushion for improving shareholder value through incremental dividend, ongoing share repurchases and earnings accretive acquisitions. In the third quarter of 2012, the company repurchased 4.4 million shares for approximately $290 million. At the end of the first nine months of 2012, the company had a low long-term debt-to-capitalization of 27.0%. Total long-term debt was approximately $3.9 billion, with no significant maturities in the near term, along with cash holdings of $3.5 billion.

Falls Church, Virginia-based Northrop Grumman Corporation is one of the largest defense contractors in the U.S. The company supplies a broad array of products and services to the U.S. Department of Defense including electronic systems, information technology, aircraft, space technology, and systems integration services. The positive case for Northrop Grumman stems from revenue growth across the board and a broad diversification of programs.

Northrop Grumman offers a strong program portfolio positioned to take advantage of focus areas in the defense space, an improving balance sheet and an ongoing share repurchase program. Also, its product line in high priority categories, such as defense electronics, unmanned aircraft and missile defense, gives Northrop Grumman an edge over competition.

Northrop Grumman’s backlog 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).

Going forward, Northrop Grumman offers a strong program portfolio positioned to take advantage of focus areas in the defense space, an improving balance sheet and an ongoing share repurchase program.

However, these are 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 Afghanistan and Iraq operations.

Like its peers, Embraer SA (ERJ - Analyst Report) and General Dynamics Corporation (GD - Analyst Report), the company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

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