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Northrop Grumman's Unit Wins $125M Contract From US Navy

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Northrop Grumman Corp.’s (NOC - Free Report) unit, Northrop Grumman Systems Corp., has secured a contract to offer support to the AN/APR-39 program.

Valued at $124.7 million the contract has been awarded by the Naval Air Systems Command, Patuxent River, MD.

Per the agreement, Northrop Grumman will provide engineering, management and logistics support to manufacture, assemble, test and deliver 127 D(V)2 processors, 40 C(V)2 processors.

Also, it will offer462 D(V)2 antenna detectors, 290 D(V)2 radar receivers, 121 D(V)2 low band arrays, 168 D(V)2 battery handle assemblies, 20 D(V)2 circuit card assemblies, 63 C(V)2 antenna detectors, 131 C(V)2 radar receivers.

Additionally, the contract covers supplying 19 C(V)2 upgrade kits and two test stations that increases production capacity to meet essential fielding needs. These services will support the Navy, Army, and the governments of Japan, Austria, and Canada.

The deal covers 63% of the purchases for the Navy, 32% for the Army, 5% for the government of Canada, 3.5% for government of Japan and 1% for the government of Austria, under the foreign military sales program.

Scheduled to be completed by February 2020, majority of the work will be performed in Rolling Meadows, IL and the rest will be executed in various locations across the United States.

Development in Defense Space

Rising terror activities and current tension between the United States and North Korea have added to growth of the industry. In sync with this, the United States along with its major allies has been strengthening their defenseto combat the internal and external threats.

On this note, the U.S. Senate recently passed fiscal 2018 defense policy bill worth $700 billion, which was proposed in July 2017. This bill provides about $640 billion for Pentagon’s main operations like buying weapons and paying the troops. The rest $60 billion for Overseas Contingency Operations will be utilized to fund the conflicts in Afghanistan, Iraq, Syria and elsewhere. Consequently, the current scenario in the defense industry is anticipated to further aid large companies like Northrop Grumman, The Boeing Co. (BA - Free Report) and Lockheed Martin Corporation (LMT - Free Report) .

Our View

Northrop Grumman benefits from a strong presence in Air Force, Space & Cyber Security programs. Moreover, the company’s product innovation and focus on strengthening its ISR wing will help maintain a stable earnings stream amid rapidly changing requirements of the defense landscape.

Being one of the largest domestic defense contractors, Northrop Grumman also getsregular orders from the various verticals of the U.S. Defense. In addition, it receives orders from the international market through foreign military sales (FMS). Markedly, the company’s international market accounted for 13.1% of its business in 2016.

Furthermore, the APR-39 programs have witnessed several upgrades in the last few years. Meanwhile, Northrop Grumman’s constant technological innovation efforts have helped the company to receive funding from the military.

Price Movement

Shares of Northrop Grumman have rallied 5.4% since Northrop Grumman's announcement of Orbital ATK (OA - Free Report) acquisition compared with the industry’s gain of 3.2% during the same time.

This shows that the news of the acquisition has received positive response from the market.

Zacks Rank

Northrop Grumman currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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