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Northrop Sees Good Times Ahead for Big Defense Firms

Northrop Grumman Corp., which won the contract last year to build the new B-21 "Raider" bomber for the Air Force, reported solid sales and profits in its latest quarterly earnings report and predicted more growth opportunities in its defense forecast as the Pentagon rebuilds.

In a report last week and in a conference call with analysts, Northrop CEO and President Wes Bush said the firm would be a major player in the current competition with Boeing Co. and Lockheed Martin Corp. to build what the Air Force is now calling the Ground Based Strategic Deterrent to replace the Minuteman III Intercontinental Ballistic Missiles.

In the third-quarter, Northrop reported sales of $6.2 billion, a 3-percent increase over third quarter 2015, while earnings rose to $602 million from $516 million, Reuters reported. "Our third quarter results demonstrate that we continue to build a strong foundation for profitable growth over the long term," Bush said.

In a defense forecast, the chief executive officer said the rising sales and profits were expected to continue as the Defense Department invests in new systems and overhauls old ones -- despite the gridlock in Congress over the defense budget.

"It is an interesting time in that it's clear that there's a significant re-capitalization wave that's underway across a number of our customer communities," Bush said. "Quite frankly, it's one that's been deferred for quite a long time."

The Pentagon was "facing the need to address a number of not only re-capitalizations of older, existing assets," he said, "but also the need to address what's going on around the globe in terms of the emergence of more aggressive threat profiles."

Bush cited the need for "the recapitalization of the nuclear infrastructure" with the GBSD to replace the Minuteman IIIs, which have been the backbone of the nation's nuclear triad.

"This too is an imperative for the country given the amount of time it has been since we really invested in our ICBM fleet," he said. "It's an area of strong expertise and knowledge-base in our company, so we see that as a really good opportunity."

Last month, at Minot Air Force Base in North Dakota, Defense Secretary Ashton Carter said of the Minuteman IIIs, "If we don't replace these systems, quite simply they will age even more and become unsafe, unreliable and ineffective."

The Air Force has estimated that the Minuteman III replacements will cost about $62 billion but Bloomberg News last month, citing the Pentagon's Cost Assessment and Program Evaluation office, put the price tag at $85 billion.

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