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Northrop Grumman Secures Two Air Force Deals Worth $96M


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Defense major Northrop Grumman Corp.’s (NOC - Analyst Report) Technology Services business division secured two modification contracts from the U.S. Air Force with a combined value of $96.4 million. Both the contracts involved providing support to the KC-10 program. Notably, KC-10 is The Boeing Company’s (BA - Analyst Report) aerial refueling tanker aircraft.

Details of the Deals

The first contract, involving delivery of 12 engine overhauls related to the KC-10 program, was valued at $54.1 million. Work related to this deal, scheduled to be over by Sep 28, 2018, will be carried out in Vancouver, Canada. The contract will utilize fiscal 2017 operations and maintenance funds.

Under the terms of the second contract, Northrop will deliver contractor logistics support for aircraft and spares involving the KC-10 program. Valued at $42.3 million, this deal will also utilize fiscal 2017 operations and maintenance funds. Work is projected to be completed by Sep 28, 2018 and will be executed across the globe. Work locations include McGuire Air Force Base, NJ; Travis AFB, CA; Hickam AFB, HI; Yakota Air Base, Japan; and Tinker AFB, OK.

Both the contracts were awarded by the Force Life Cycle Management Center, Tinker Air Force Base, OK.



KC-10 Program & Northrop

Northrop Grumman provides 24/7 global logistics support for the KC-10 Extender fleet of 59 aircraft, which supports worldwide operations in dual capacity as a tanker and cargo transport. Northrop’s services include comprehensive supply chain management; engine management, overhaul and repair; aircraft depot maintenance and field teams; field service representatives and ground support equipment support, as well as engineering support services.

On average, Northrop Grumman delivers 29 scheduled depot maintenance aircraft and 46 engines per year. Per management, Northrop’s reliability improvements in engineering, depot and engine reliability and performance help the U.S. Air Force’s Air Mobility Command achieve a 49-month sustained 85% mission capable rate on average – the highest sustained rate for the KC-10 in more than 16 years.

Our View

The recent contracts reflect Northrop’s role in the maintenance of KC-10, the world’s largest tanker, for which the company also provides advanced logistic support.

Going forward, we expect the restructuring initiatives at Technology Services, along with more contract wins, to turn the business around to profitability.

 Others Stocks to Consider

In this context we would like to mention a few other significant peers of Northrop Grumman in the aeroscpace and defense sector, which include General Dynamics Corp. (GD - Analyst Report) and Lockheed Martin Corp. (LMT - Analyst Report) .

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