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Northrop Grumman Unit Wins $98M Contract for USSTRATCOM

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Falls Church, VA-based Northrop Grumman Corp.’s (NOC - Free Report) unit, Northrop Grumman Systems Corp., has won a contract to offer overall operations, and maintenance of command and control capabilities for the U.S. Strategic Command (USSTRATCOM).

Details of the Deal

The contract, which is valued at $98 million, has been awarded by the 55th Contracting Squadron, Offutt Air Force Base, NE.

Per the deal, Northrop Grumman will provide software engineering, system engineering, testing, incorporation, installation, security engineering and administrative support. Additionally, the company will offer added support tasks necessary to give dependable, effective, and user-friendly, net-centric abilities in order to contribute to the overall operations and maintenance of USSTRATCOM C2 capabilities for the commander of USSTRATCOM.

Furthermore, these tasks will support combatant commands, component commands, and other authorized users with modernized mission critical communications and computer systems employing general integrated information and decision toolsets, applications and capabilities in a fully-synchronized, net-centric information environment, essential for maintaining deterrence and, if required, dominate in conflict.

The work is scheduled to be completed by Feb 28, 2023, and performed in Offutt Air Force Base, NE. The contract will use fiscal 2017 operations and maintenance funds.

Qualities of USSTRATCOM

Headquartered at Offutt Air Force Base, NE, USSTRATCOM is one of nine unified commands in the U.S. Department of Defense. Also, it is liable for strategic deterrence, global strike, and operating the defense department's Global Information Grid. USSTRATCOM offers a number of abilities to support other combatant commands that covers strategic warning; integrated missile defense; and global command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR). Notably, this vibrant command gives national leadership a unified resource for better understanding of specific threats around the world and the means to respond to those threats swiftly.

Our View

Being the fourth-largest U.S. defense contractor, Northrop Grumman supplies a broad array of products and services to the U.S. Department of Defense, including defense electronics, unmanned aircraft and missile defense. In addition, the company continues to witness strong demand for its unmanned air systems on a global scale.

Meanwhile, Donald Trump’s presidency seems to have created a win-win situation for the Aerospace and Defense majors like Northrop Grumman, Lockheed Martin Corp. (LMT - Free Report) , The Boeing Co. (BA - Free Report) and Huntington Ingalls Industries, Inc. (HII - Free Report) . Evidently, the outlook for various stocks in this space has improved manifold in recent months on the back of enhanced spending promises that Trump had made in his latest “America First” budget.

Specifically, the fiscal 2017 budget proposal reflected an annual increase of approximately $2.2 billion over the year-ago budget. Again, the Trump administration’s request for additional fiscal 2017 appropriations included an additional base budget of $24.9 billion and Overseas Contingency Operations (OCO) budget worth $5.1 billion. A moderate flow of funds from the Pentagon also added to the optimism.

Going forward, we expect the increased spending to be allocated to certain key areas that might unlock higher opportunities for Northrop Grumman.

Price Movement

Northrop Grumman’s stock has been up 19.9% in the last one year, underperforming the Zacks categorized Aerospace–Defense industry’s gain of 27.6%. This could be because higher operating expenses continue to partially impact Northrop Grumman’s profit margin. Also, the company may be challenged by economic and political factors. Furthermore, in a highly competitive environment, customers might get attracted to similar products offered by its peers at a lower price, which is a major concern.

Zacks Rank

Northrop Grumman currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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