Northrop Grumman Corp. (NOC) yesterday bagged two Pentagon contracts worth $5.87 billion. The first contract is worth $3.44 billion, from the Air Force for providing services for the stealth bomber B-2 bomber fleet. The second contract is of $2.43 billion from the Navy for providing services on overhaul, alterations, repair, maintenance and refueling of the nuclear-powered aircraft carrier USS Theodore Roosevelt.
 
Northrop Grumman is the second largest defense contractor after Lockheed Martin Corp. (LMT). These contracts will boost the dwindling backlog of Northrop, which fell to $70.4 billion after the fiscal second quarter from $76.9 billion year over year. Northrop’s backlog was affected by the cancellation of the $5.1 billion Kinetic Energy Interceptor program by the U.S. Government.
 
The Air Force contract will maintain the status-quo of the Electronic Systems segment as the star performer. In the fiscal second quarter Electronic Systems’ operating income grew by one-fourth year over year.
 
Similarly the navy contract will rejuvenate the Shipbuilding segment where sales shrunk by 10%, year over year in the second quarter. The shipbuilding segment’s performance was weak due to lower volume year over year for expeditionary warfare programs.
 
Based in Los Angeles, California, Northrop Grumman provides products, services, and solutions in information and services, aerospace, electronics and shipbuilding to the military, government, and commercial customers of United States and beyond. The company is the largest IT service provider to the federal government. In addition, Northrop Grumman is the only nuclear-powered aircraft shipbuilder in the United States. We maintain our Long-Term Outperform recommendation on the shares.
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