Northrop Bags Navy Contract - Analyst Blog

Northrop Grumman Corp. (NOC) bagged a $171 million fixed-price contract from the U.S. Navy. The company will provide long lead materials for a continuation in the Aegis-class DDG 51 destroyer program. The funds will be used to purchase long lead time materials and major equipment in support of the new ship, including main propulsion engines, gas turbine generators, propellers and air conditioning systems. The work will be performed at the company’s Pascagoula shipyard.

The DDG 51 destroyer program was originally awarded to Northrop Grumman in April. The company has delivered 26 of 28 ships, with two more ships currently under construction in Pascagoula.

These contracts will boost the dwindling backlog of Northrop, which fell to $71.5 billion after the third quarter of fiscal 2009 from $78.1 billion at year-end 2008. Though Northrop Grumman is one of the largest defense contractors, its backlog was affected by the cancellation of the $5.1 billion Kinetic Energy Interceptor program by the U.S. Government.

Northrop Grumman’s future success in the competitive defense industry depends upon its ability to develop and market its defense-related products and services to the U.S. Government, as well as its ability to provide the people, technologies, facilities, equipment and financial capacity needed to deliver those products and services with maximum efficiency. The company competes with Force Protection Inc. (FRPT), General Dynamics Corp. (GD) and Boeing Co. (BA).

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 Neutral recommendation on the shares.