Northrop Grumman Corp (NOC)

tcgfund (62.29) Submitted: 5/06/07 1:56 AM : Start Price: $71.80 NOC Score: -1.92

1. Second largest defense company in U.S.:
   -125,000 employees
   -Strong/vast infrastructure
   (Yahoo! Finance Company Profile)

2. Strong position in market:
   -Largest IT services provider to U.S. government
   -Only nuclear-powered aircraft builder
   -Largest contractor to U.S. Navy
   -Difficult for new competitors to enter market
   (Business Source Premier)

3. Broad industry exposure:
   -NG has seven business divisions:
      Electronics
Ships
Integrated systems
Mission systems
Information technology
Space technology
‘Defense Other’
(10K/Annual Report)
-With such varied revenue generating segmentation, a decrease in one segment can be compensated by gains in another.

4. Government Contracts:
-Reliable contracts, not easy for government to jump ship because of the nature of the contracts (often highly secret)
-Established relationship with government
-Government willing to pay for defense systems and is capable of taking on huge debt
(Hoovers)

5. Strong revenue growth:
   -NG has seen strong growth in important “key” business sectors
   -Solid and increasing stock price (owner/investor satisfaction)
   (10K)

6. Steady cash flow:
   -Currently has about 1 billion in cash
   -Cash on hand for future growth/low cost of capital
   (10K)

7. Lower debt than competition:
-Long term debt: $3.9 billion
-Short term debt: $170 million
-Lockheed:
-Long term debt: $4.7 billion
-Short term debt: $202 million

8. Product line:
   -Few substitutes
   -Inelastic demand
   (Hoovers)

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