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Northrop Wins LCS Navy Deal

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Defense contractor Northrop Grumman Corp. (NOC - Free Report) has clinched a U.S. Navy contract for Littoral Combat Ship (“LCS”) Mission Modules.

Per this $25.2 million contract, the company will supply three added mission module packages, comprising two for surface warfare missions and one for mine countermeasures. LCS is a fast, highly maneuverable, networked surface combat ship which engages in three main missions, namely, mine warfare, antisubmarine warfare and surface warfare.

Northrop Grumman as a mission package integrator maintains a disciplined systems engineering process and ensures that the different components are effectively integrated into the larger LCS system. Moreover, every mission package entails the assimilation of manned and unmanned systems that are capable of operating in all domains whether air, surface or subsurface.

Under the latest contract, the mission modules will help in modular mission package embarkation, mission package operations and debarkation. These are essential to LCS’ modular Mission Package concept.

To date, Northrop Grumman has delivered two surface warfare mission modules. The company has also delivered its first mine countermeasures mission module for LCS. The second and third mine countermeasures mission modules, along with the third surface warfare mission module are also under production.

Northrop Grumman’s product line is well positioned in high priority categories, such as, defense electronics, unmanned aircraft and missile defense. We expect revenue and earnings growth 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.

Despite the cuts in defense spending and the threat of sequestration, the company has been able to seal many contracts from the Department of Defense. The positive case for Northrop Grumman 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.  

Northrop Grumman presently retains a short-term Zacks Rank #2 (Buy). Other well-placed operators include Lockheed Martin Corp. (LMT - Free Report) , Alliant Techsystems Inc. and Raytheon Co. (RTN - Free Report) . While Alliant Techsystems and Lockheed Martin carry a Zacks Rank #1 (Strong Buy), Raytheon holds a Zacks Rank #2 (Buy).

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