(NOC) Northrop Grumman to Supply G4 Pods

Northrop Grumman Corporation (NOC) has received a contract worth $103 million from the Naval Air Systems Command for the supply of LITENING G4 pods.

Besides providing LITENING G4 targeting systems to the U.S. Marine Corps, it will supply G4 upgrade kits and spares to the Air National Guard in order to bring their Block 1 pods to the G4 pattern, per the contract.

LITENING G4 Advanced Targeting Pod, the latest version of the company’s LITENING family of targeting pods, comprises improved target identification and other advanced target recognition and identification features. The G4 technology includes a full one megapixel (1000×1000) Forward Looking Infrared.

Moreover, its megapixel sized Charge-Coupled Device (“CCD”) sensors and optics offer wider field of view and improved zoom to deliver more accurate target identification and location at longer ranges than previous generations of the Litening.

Till date, the company has delivered 200 LITENING G4 systems. Additionally, in February this year, the company had received two follow-on contracts worth $66 million from the U.S. Air Force to provide additional LITENING SE advanced targeting pods. These two follow-on contracts form part of a seven-year indefinite delivery/indefinite quantity contract worth $920 million that was received by the company in October 2010.

We believe that the company’s diversified revenue, a strong program portfolio, improving balance sheet and an ongoing share repurchase program position it well for future growth. Also, its product line in high priority categories, such as defense electronics, unmanned aircraft and missile defense, gives Northrop Grumman an edge over competition.

However, we expect these positives to be offset by apprehension regarding defense cutbacks on high-cost platform programs, over-exposure to the DoD budget, lower backlog, cost over-runs and reductions in the Afghanistan and Iraq operations.

The company presently retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.

Los Angeles based Northrop Grumman Corporation 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 mainly competes with General Dynamics Corporation (GD) and The Boeing Company (BA).

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