Zacks_Analysts' Blog : Northrop Wins Defense Contract - Analyst Blog

Defense contractor Northrop Grumman Corporation (NOC) received two contracts worth $22.4 million and $13.6 million from the Department of Defense (DoD) for work on the Global Hawk program.

Global Hawk is an unmanned aerial vehicle used by the United States Air Force and Navy as a surveillance aircraft.

The contract worth $22 million involves software maintenance while the other contract involves infrastructure portion of the engineering and manufacturing development.

The Boeing Co. (BA), which competes with Northrop, also received additional contracts worth $61 million from the U.S. Air Force to produce C-130 Avionics Modernization Program (AMP) kits, which are a part of  a low-rate initial production (LRIP) contract that was awarded in 2010.

Northrop continuously receives follow-on contracts from the DoD for enhancement of its existing products. Recently, the company won a contract valued at up to $141 million for continued development of the U.S. Department of Defense Automated Biometric Identification System (DoD-ABIS).

Northrop reported impressive first quarter 2011 adjusted earnings of $1.67 per share compared with $1.34 in the first quarter 2010. Northrop results also exceeded the Zacks Consensus Estimate of $1.55 for the quarter. The upside in earnings was attributable to better performance across all its segments.

In its earnings conference call, the company reaffirmed its revenue guidance for fiscal 2011 to about $27.5 billion. It however raised its fiscal 2011 earnings per share range from $6.40 - $6.60 to $6.50 - $6.70.

The Zacks Consensus Estimate for second-quarter 2011 is $1.67 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $6.71 per share and $7.20 per share.

We maintain our Neutral rating on Northrop Grumman. The quantitative Zacks #3 Rank (short term Hold rating) on the stock indicates no clear directional pressure on the shares over the near term.

Based in Los Angeles, California, Northrop Grumman Corporation is one of the leading defense contractors in the U.S. The company supplies a broad array of products and services to the U.S. DoD, including electronic systems, information technology, aircraft, space technology and systems integration services.