Northrop Grumman Corporation (NOC) has received a cyber security one-year multi-million dollar contract from the Maryland Procurement Office. The competitively awarded contract includes four additional option years.
Per the contract, the company will develop, integrate and sustain cloud-based information repositories into an integrated product development team environment with the government.
We believe Northrop is uniquely positioned in fulfilling the terms of the contract as it has a legacy of strong program performance in large data repository programs with the intelligence community.
Moreover, the company is adding to its portfolio privately held M5 Network Security Pty Ltd. It has entered into a definitive agreement to acquire the Canberra, Australia-based provider of cyber security and secure mobile communications products and services, and advanced analytics to Australian military and intelligence organizations. The acquisition would enhance Northrop’s Australian market exposure in the fields of cyber security and communication solutions.
Northrop Grumman supplies a broad array of products and services to the U.S. Department of Defense, including electronic systems, information technology, aircraft, space technology, and systems integration services. The company believes that this contract is a major step towards the strategic aim to become the leading systems integrator of cloud-based information management systems for cyber security.
Also, with its strong program portfolio, diversified revenue and earnings streams improving balance sheet, and an ongoing share repurchase program, the company is well poised to take advantage of various opportunities.
However, we prefer to remain on the sidelines due to apprehension regarding defense cutbacks on high-cost platform programs, over-exposure to the DoD budget, lower backlog, cost over-runs, and reductions in Afghanistan and Iraq operations. Besides, there aren’t many near-term catalysts on the horizon. The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.
The company mainly competes with General Dynamics Corporation (GD) and Lockheed Martin Corporation (LMT).
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