Northrop Grumman (NOC +1.4%) has filed a formal protest with the U.S. Government Accountability Office against the U.S. Air Force's decision to pick Raytheon (RTN +0.3%) to develop its next-generation, long-range radar system.
Raytheon overpowered both Lockheed Martin (LMT +1.5%) and Northrop Grumman to develop a replacement for the Air Force's current TPS-75 radar, which has been in service since the late 1960s.
Spokeswoman Patty Welsh from Hanscom Air Force Base in Massachusetts says the Air Force issued a stop-work order for the program after the protest was filed.
Lockheed officials say they were still reviewing the briefing they received from the Air Force about the contract award to Raytheon.
Net income of $473M, or $2.26 per diluted share vs. $497M, or $2.14 per diluted share, in the third quarter of 2013.
The company repurchased 6M shares of its common stock for $753M during the quarter. As of Sept. 30, the company had repurchased 37.7M shares toward its previously announced goal of retiring 60M shares of its common stock by the end of 2015.
Total backlog as of Sept. 30 increased 8% Q/Q to $38.5B.
The company expects full-year earnings to be between $9.40-$9.50 per share, and revenue of $23.8B.
Raytheon (NYSE:RTN) overpowered both Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC) for a contract to build a next-generation long-range radar system for the U.S. Air Force, replacing current TPS-75 radar, which has been in service since the late 1960s.
The deal, valued at around $1B, kicks off the next phase of a program begun in 2009, when the Air Force funded work on full-scale prototypes by all three companies.
Raytheon's initial $19.5M deal will cover continued development of the Three-Dimensional Expeditionary Long-Range Radar (3DELRR) program, and construction of three initial systems. The Air Force then plans to buy three more systems for a total of $72M.
The value of the contract is likely to increase significantly due to additional orders from the Air Force and foreign military purchases.
Northrop Grumman (NOC +2.4%) is upgraded to Buy from Hold with a $145 price target at Deutsche Bank, which sees the down cycle in defense spending fading and the possibility of budget increases into FY 2017.
The firm feels defense spending is bottoming as global tensions rise along with a shift in public sentiment on threats and priorities, and a turn in defense spending would benefit NOC more than its peers since 86% of the company's sales are tied to the U.S. government.
DB also likes that NOC returns 100% of free cash flow to its shareholders; NOC increased its dividend by 15% in May, has bought back 17M million shares YTD, has retired 30M shares and plans to retire 30M more shares by year-end 2015.
U.S. Navy official Captain Jim Hoke says improved reliability may allow the Navy to purchase fewer than the 68 Northrop Grumman (NYSE:NOC) Triton spy drones planned for maritime surveillance, but current estimates still call for the entire order.
Hoke says he also has a team of people looking for other ways to reduce the cost of building and operating the unmanned plane. Each aircraft currently costs about $100M.
The Navy aims to start using Triton drones by the end of 2017.
Lockheed Martin (NYSE:LMT) is narrowing in on a ~$4B deal with the Department of Defense for 43 more F-35 fighter jets that will lower the cost of the jet's airframe by 2-4%.
The government buys the jets' engines separately from Pratt & Whitney, which said this week that contracts for the seventh and eighth batches of its F135 engines will result in prices 7.5%-8% cheaper than the firm's last purchase.
Other initiatives are also being worked on to lower the plane's costs, including changes in manufacturing and "block buys" by some foreign countries with pending orders.
Lockheed is also investing $170M in cost-cutting measures with suppliers BAE Systems (OTCPK:BAESY) and Northrop Grumman (NYSE:NOC) to generate combined savings of $1.8B.
DARPA (Defense Advanced Research Projects Agency) has selected Northrop Grumman (NOC +0.2%) to develop advanced wideband digital antenna technology for next generation radio frequency sensors using active electronically scanned arrays.
Under an $11.9M contract, Northrop Grumman will begin phase one of the "Arrays on Commercial Timescales" program for the DARPA Microsystems Technology Office.
The program will design key technologies for next-generation active electronically scanned arrays by designing a reusable digital common module that contains the necessary integrated circuits.
Key subcontractors on the Northrop Grumman "Arrays on Commercial Timescales" team are Semtech (SMTC -0.4%) and Systems & Technology Research.
The "total" yield of a company combines the dividend yield and the buyback yield - that is the yield boost from reducing the total amount of shares outstanding. Together with S&P's Howard Silverblatt, Barron'sputs together a list of the top 20 companies in the S&P 500 based on "total" yield.
While buybacks don't guarantee a strong stock - witness consistent buyback champs like IBM and Kohl's (NYSE:KSS) - Warren Buffett goes to bed at night praying for IBM's share price to go down so the company can buy back more stock for a given dollar amount (though The Oracle has said he doesn't expect this logic to win many fans).
The flip-side are those companies - financials and energy come to mind - who tend to buy back stock at high prices only to find themselves forced to reissue it at lower prices when times get tough. A consistent plan helps, and Travelers (NYSE:TRV), under CEO Jay Fishman, has been maybe the best example of this - halving the share count since the end of 2006.
ETFs? The Powershares Buyback Achievers Portfolio (NYSEARCA:PKW) gained 45.6% in 2013, 1,300 basis points better than the S&P 500. Since inception in 2006, it's up an annualized 9%, more than 200 basis points better than the S&P. A newcomer - the Cambria Shareholder Yield ETF (NYSEARCA:SYLD) - has beaten the S&P by about 250 basis points since its May 2013 inception.
Northrop Grumman (NYSE:NOC) and four other contractors have been selected by the U.S. Navy to upgrade cybersecurity, command and control, communications and intelligence (C4I) systems across its fleet.
The multiple award contract has a potential value of $2.5B over eight years.
Northrop Grumman (NYSE:NOC), Scaled Composites and Virgin Galactic are developing a preliminary design and flight demonstration plan for DARPA's (Defense Advanced Research Projects Agency's) experimental spaceplane XS-1 program.
In addition to its reusable boosters which will afford low-cost launches, the XS-1 will serve as a test-bed for new generation hypersonic aircraft.
Northrop Grumman is defining its concept for XS-1 under a 13-month, phase one contract valued at $3.9M.
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Sep 24, 7:27 AM
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Northrop Grumman Corporation is a security company providing innovative systems, products and solutions in unmanned systems, cybersecurity; command, control, communications and computers (C4) intelligence, surveillance, and reconnaissance.