Northrop Group gets a $40 Billion package
The Federal Government certainly threw Northrop Group a bone today in the form of a $40 Billion contract to produce refueling tankers. The stock was up 6% in after-hours trading but the company still looks like a great buy.
While the stock is near its all time high, Northrop Group might be one of the safest investments around. Unlike most industries, war is generally recession proof and the government will always be willing to shill out money for new equipment. The beauty of this stock really lies in the fundamentals. Before the deal NOC had a PE of 15 and a PEG ratio of just less than one, that’s good reason to buy all on its own.
NOC trades at just a $26 Billion dollar market cap, and the recent contract is worth $40Billion. Some reports say that the deal may be extended to improve all of the US Navy tankers which would bring another $100 Billion in contracts. This marks a historic event in that a European company wins a US arms package. Many expected the Chicago based Boeing to win this contract hands down.
NOC now has access to a large military budget in the US. Never has the corporation done work for the Navy on this level. Now that the company has the capacity and contract in hand, it should be able to leverage its position into even more military and non-military contracts while stealing marketshare from Boeing.
Looks like a buy here, even just a few dollars away from its 52 week high.
I agree with you on the buy part. It will be interesting to see what happens with all of the negative press that’s happening with ‘outsourcing’ the work to Europe, etc. Not saying it will rescind the contract, but there may be some effects of the deal that change things around some. I guess we’ll have to wait and see.