Defense major Northrop Grumman Corporation’s (NYSE:NOC) business segment, Technical Services, recently won a contract for delivering nine engine overhauls to support the KC-10 program. Work related to the deal is expected to be finished by March 2018.
Valued at $39.9 million, the contract was awarded by the Air Force Life Cycle Management Center, Tinker Air Force Base, OK. Work will be executed worldwide, including McGuire Air Force Base, NJ; Travis Air Force Base, CA and Tinker Air Force Base, OK. The company will utilize fiscal 2018 operations and maintenance funds to complete the task.
KC-10 Program & Northrop
Northrop Grumman provides 24/7 global logistics support for the KC-10 Extender fleet of 59 aircraft. The fleet supports worldwide operations in dual capacity as a tanker and cargo transport. Northrop’s services include comprehensive supply chain management; engine management, overhaul and repair; aircraft depot maintenance and field teams; field service representatives and ground support equipment support, as well as engineering support services.
On average, Northrop Grumman delivers 29 scheduled depot maintenance aircraft and 46 engines per year. Per management, Northrop’s improvements in engineering, depot and engine reliability and performance help the U.S. Air Force’s Air Mobility Command achieve a 49-month sustained 85% mission capable rate on average — the highest sustained rate for the KC-10 in more than 16 years.
Our View
Northrop Grumman is one of the largest defense contractors in the country. Owing to its vast product portfolio, the company enjoys a strong presence in Air Force, Space & Cyber Security programs. Northrop Grumman also invests substantially in product innovation and has a strong focus on strengthening its ISR wing. This has helped the company in winning notable orders from both domestic and international sources.
The latest contract reflects Northrop Grumman’s role in the maintenance of KC-10, the world’s largest tanker, for which the company provides advanced logistic support. Going forward, we expect the modernization initiatives at Technology Services segment, along with more contract wins expected, to substantially boost the business’ profitability.
Moreover, the recently approved fiscal 2018 defense policy bill worth $700 billion also buoys optimism for investing in major defense stocks. Therefore the time is ripe to add defense primes like Northrop Grumman, The Boeing Company (NYSE:BA) , Lockheed Martin Corporation (NYSE:LMT) and General Dynamics Corporation (NYSE:GD) in your watchlist.
Price Movement
Northrop Grumman’s stock has returned 37% over a year, underperforming the 51.2% rally of the industry it belongs to. This may have been caused by higher operating expenses that the company has been incurring for past few quarters.
Zacks Rank
Northrop Grumman currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Northrop Grumman Corporation (NOC): Free Stock Analysis Report
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