Northrop Grumman Corporation’s (NOC) subsidiary AMSEC LLC has been awarded a contract by the U.S. Navy for providing engineering services, technical, logistics, maintenance and installation support to the cargo and weapons handling systems. The cost-plus-fixed-fee task order contains a base period with four one-year option periods with a total cumulative value of approximately $30.5 million.
Northrop Grumman will commence work on the contract in the month of December, which will be performed on U.S. Navy and Military Sealift Command ships in various locations that includes the U.S. East Coast, West Coast and Japan. The company expects to finish work on the contract by December 2015.
AMSEC LLC, a wholly-owned subsidiary of Northrop Grumman’s Shipbuilding sector, is a full-service provider of engineering, logistics and technical support services to the U.S. Navy and maritime industry.
Los Angeles-based Northrop Grumman is one of the world’s leading shipbuilders and the second largest defense contractor in the U.S. The company supplies a broad array of products and services to the U.S. Department of Defense, including electronic systems, information technology, submarines and surface ships, aircraft, space technology and systems integration services.
Northrop Grumman is the second largest U.S. defense contractor in terms of fiscal 2009 revenue, with a major platform centric focus. The company has a strong presence in the Navy, Air Force, Space & Cyber Security programs. Northrop’s product line is well positioned in high priority categories, such as defense electronics, next-generation ships, unmanned aircraft and missile defense.
Northrop’s future outlook remains largely secure based on expectations of solid revenue growth across the board, a broad diversification of programs, strong order bookings and an order backlog of more than $64.6 billion at the end of third quarter 2010.
Revenue and earnings growth continues to be driven by its strong presence in the current focus areas of cyber security, modernization of defense and homeland security assets, intelligence, surveillance and reconnaissance systems, advanced electronics and software development.
However, apprehensions regarding defense cutbacks on high-cost platform programs, over-exposure to the U.S. defense budget, lower backlog, cost over-runs and substantial exposure to missile defense- related programs keep us on the sidelines.
We retain our ‘Neutral’ recommendation for the stock. The company currently has a Zacks #3 Rank (Hold), in line with its closest peers General Dynamics Corporation (GD) and The Boeing Company (BA).
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