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Northrop Receives Army Contract

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Northrop Grumman Corporation (NOC - Analyst Report) clinched a six-year contract to upgrade the current instrumentation systems at the National Training and Joint Readiness Training centers. The contract was received from the U.S. Army Program Executive Office for Simulation, Training and Instrumentation (“PEO STRI”) for an undisclosed amount.

The National Training and Joint Readiness Training outfits are located in Fort Irwin, California and Forth Polk, Louisiana, respectively. These centers offer real-life simulation exercises for the training of land forces at the combat level which also includes secondary and supporting units in a plethora of military operations.

Per the contract, Northrop Grumman will offer its services in improving the observer controller communications part of the present range communications system at the National Training center and also the range data measurement system.

Similarly, at the Joint Readiness Center, the company will modernize the observer controller communications and range data measurement systems.

The project, Combat Training Center Instrumentation System (“CTC-IS”), will substitute technical features like legacy voice, video, data and target instrumentations system and networks. Apart from this, Northrop will enhance other technical mission necessities like mobile video units, unmanned aerial vehicle ground control station interface, forward operations base interface as well as the stationed and portable after-action theaters.

The purpose behind the modernization program is to create a cohesion between the components of a tangible training system and a widened communications base. The program will accentuate situational awareness in live combat exercises; improve analysis and provide timely feedbacks of training performances and address all other important needs to prepare U.S. soldiers on critical missions.

Looking forward, we anticipate this endeavor will prove to be profitable and help fetch lucrative returns for the company. Northrop sustained its string of contract wins by recently securing an $80 million deal for the indefinite-quantity/indefinite-delivery of Next Generation Command and Control Processor ("NGC2P") Technology Refresh and Link 22 development to the Space Naval and Warfare System Command.

The company has potential upside opportunities so far as backlog orders are concerned by virtue of its unmanned aerial vehicle ("UAV") programs involving Broad Area Maritime Surveillance ("BAMS"), Fire Scout and Navy Unmanned Combat Air System ("UCA").

However, the U.S. government's decision to cut back spending in the defense sector will cast a shadow on the company’s prospects. This negative trigger is reflected in the company’s Zacks Consensus Estimate for the last quarter of 2012 which slid 6.05% year over year to $1.74 per share. Nonetheless Northrop Grumman currently carries a Zacks Rank #3 (Hold).

Another player in the aerospace and defense domain is General Dynamics Corporation (GD - Analyst Report). The company recently won a $32 million contract from Northrop Grumman for providing software related to the Communications Ground Control System for NATO’s Alliance Ground Surveillance (“AGS”) program.

Based in Falls Church, Virginia, the $16.54 billion company provides products, services, and solutions in aerospace, electronics, information systems, and technical services worldwide.

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