The Zacks Analyst Blog Highlights: Northrop Grumman, General Dynamics,
Huntington Ingalls, New York Times and InterActiveCorp
CHICAGO, Sept. 27, 2012
CHICAGO, Sept. 27, 2012 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Northrop Grumman Corporation
(NYSE:NOC), General Dynamics Corporation's (NYSE:GD), Huntington Ingalls
Industries Inc. (NYSE:HII), The New York Times Company (NYSE:NYT) and
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Here are highlights from Wednesday's Analyst Blog:
Northrop Buys M5 Network Security
Northrop Grumman Corporation (NYSE:NOC) has closed the acquisition of M5
Network Security Pty Ltd. for an undisclosed amount. Canberra,
Australia-based, M5 Network Security Pty Ltd. provides cyber security and
secure mobile communications products and services.
M5 Network Security endows Australian military and intelligence organizations
with advanced analytics. The acquisition would enhance Northrop's Australian
market exposure in the fields of cyber security and communication solutions.
The aerospace companies seem to be involved in acquiring companies that
provide cyber security tools and services. Recently, one of the company's
peers General Dynamics Corporation also completed the acquisition of Fidelis
Security Systems, Inc. Fidelis is a market leader in cyber security tools that
provide real-time network visibility, analysis and control. Its network
security solutions assist customers in preventing advanced threats and data
Northrop Grumman is a leading global security company providing innovative
systems, products and solutions in aerospace, electronics, information
systems, and technical services to government and commercial customers
worldwide. At the end of the second quarter of 2012, cash and cash equivalents
were $3.1 billion, up from $2.8 billion in the second quarter of 2011. Cash
provided by (used in) continuing operations during the quarter was $876
million versus ($34) million in the year-ago period.
Going forward, Northrop Grumman's strong balance sheet and cash flows provide
substantial financial flexibility and a cushion for improving shareholder
value through incremental dividend, ongoing share repurchases and earnings
Recently, the company had also authorized an increase in the company's
outstanding share repurchase authorization to $2 billion of common stock. As
of June 30, 2012, Northrop Grumman had 248 million shares outstanding and $1.1
billion remaining under its share repurchase authorization.
Moreover, Northrop has a strong presence in Air Force, Space & Cyber Security
programs. Revenue and earnings growth continue to be driven by its strong
presence in the current focus areas of cyber security, modernization of
defense and homeland security assets, intelligence, surveillance and
reconnaissance systems, advanced electronics and software development.
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 #3 Rank
(Hold) that corresponds with our long-term Neutral recommendation on the
General Dynamics Wins New Logistics Contract
General Dynamics Corporation's (NYSE:GD) business unit, General Dynamics
Information Technology, has received a three and a half years contract worth
$94.4 million to support the Total Integrated Ground Equipment Readiness
Contractor Logistics Support (TIGER CLS) contract of U.S. Marine Corps Systems
The contract follows a multiple-award, indefinite delivery, indefinite
quantity contract awarded in May 2010 worth $6.6 billion if all options are
exercised under Defense Intelligence Agency ("DIA") Solutions for the
Information Technology Enterprise (SITE) contract.
Per the current contract, the company will provide command, control,
communications, computers, intelligence, surveillance and reconnaissance
(C4ISR) systems with lucrative, novel technology, logistics and program
management support. These C4ISR systems provide critical information and
communications links to numerous stakeholders worldwide of Marine Corps'
Apart from this contract, General Dynamics Information Technology has been
managing daily operations of global mission-critical IT services for Defense
and Intelligence Community customers for a long time. The business unit has
been successful in delivering IT solutions for the Battlefield Information
Collection and Exploitation System, INSCOM Information Technology Support
Services and the Air Force Distributed Common Ground System programs.
Acquisition of companies like Open Kernel Labs, Inc. and Fidelis Security
Systems, Inc. has added to the portfolio of General Dynamics Information
Technology and helped it to complete its task orders.
Going forward, key growth drivers for the company include the improving
business jet market, its stable business of U.S. military vehicles, an ongoing
share repurchase program and strong cash flow generation. However, the company
is largely tied to the U.S. defense budget, where the threat of budget cuts is
looming. Also, we are concerned about the risks related to the execution of
The company presently retains a short-term Zacks #4 Rank (Sell). We have a
long-term Neutral recommendation on the stock.
General Dynamics is expected to release its third quarter 2012 results on
October 24, 2012. The Zacks Consensus Estimates for the third quarter and full
year 2012 are $1.77 and $7.10, respectively.
Based in Falls Church, Virginia, General Dynamics engages in mission-critical
information systems and technologies; land and expeditionary combat vehicles,
armaments and munitions; shipbuilding and marine systems; and business
aviation. The company operates through four segments: Information Systems &
Technology, Combat Systems, Marine Systems, and Aerospace.
The company mainly competes with Northrop Grumman Corporationand Huntington
Ingalls Industries Inc. (NYSE:HII).
NY Times Divestiture Activities
The economy, which has still not completely awakened from its state of
hibernation, has been impeding the growth of publishing companies, and The New
York Times Company (NYSE:NYT) is no exception.
Challenging economic conditions, along with softness in advertising demand,
have been weighing upon the company's performance. The publishing companies
have been trying to shield themselves from the impact of an unstable market
and have been contemplating new revenue generating possibilities.
Publishing companies have been offloading assets that bear no direct relation
with the core operations. The New York Times Company recently completed the
sale of About Group, which it acquired in 2005, to InterActiveCorp
(Nasdaq:IACI) for a consideration of $300 million. The About Group segment
comprises the websites About.com, ConsumerSearch.com and Caloriecount.com,
along with other related businesses.
Management had to take the hard decision to sell About Group, which has been
facing declining revenue since the last two quarters. About Group segment's
revenue dropped 8.7% in the second quarter of 2012 due to falls witnessed in
both cost-per-click and display advertising. During the first quarter, revenue
Prior to this, in May 2012, The New York Times Company divested its remaining
stake (210 Class B units) in the Fenway Sports Group, the owner of the Boston
Red Sox and the Liverpool Football Club, for $63 million.
Initially, The New York Times Company used to hold a 17.75% stake (or 750
Class B units) in Fenway Sports Group, which it had acquired in 2002 for $75
million. But the economic downturn in 2008 and sinking print advertising
demand compelled management to look for strategic options to get rid of the
non-core assets, and infuse the proceeds to augment its struggling publishing
Another example of shedding the assets by the company is the sale of Regional
Media Group in December 2011 – consisting of 16 regional newspapers, print
publications and associated ventures – to Halifax Media Holdings LLC, the
proprietor of The Daytona-Beach News Journal in Florida, for approximately
Waning print advertising revenue in an uncertain economy, compelled The New
York Times Company to take this tough decision of divesting Regional Media
Group, part of The New York Times Media Group. This would allow the company to
re-focus on its core newspapers and pay more attention to its online
activities. The decision to offload the division is also considered part of
the cost containment efforts undertaken to stay afloat in this turbulent
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