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posted: 1/30/2014 10:33 AM

Northrop Grumman's profit exceeds estimates as sales drop

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Bloomberg News

Northrop Grumman Corp., the U.S. government's fifth-largest contractor, said fourth-quarter profit beat analysts' estimates as sales fell.

Net income from continuing operations in the quarter declined 10 percent to $478 million, or $2.12 a share, compared with $533 million, or $2.14 a share, a year earlier. Northrop exceeded the $1.94-a-share average estimate of 18 analysts surveyed by Bloomberg.

Sales declined 4.9 percent to $6.16 billion in the quarter from a year earlier, the Falls Church, Virginia-based company said in a statement today. Electronic systems was the only unit reporting a gain.

The company rose 2.3 percent to $114.70 at 9:42 a.m. in New York, the most since Oct. 24. It climbed 68 percent in the 12 months through yesterday, surpassing the 18 percent gain in the Standard & Poor's 500 Index during the same period.

Northrop said its full-year profit from continuing operations will be $8.70 to $9.00 a share on sales of $23.5 billion to $23.8 billion, down from $24.7 billion in 2013. The average estimate of 16 analysts surveyed by Bloomberg was $8.51 a share.

Defense contractors have struggled with the effects of automatic federal spending cuts and delays in passing budgets funding the U.S. government.

"Although we are encouraged by progress toward a more normal budgeting process for our customers, we expect lower sales in 2014, particularly for our short-cycle businesses," said Wes Bush, Northrop's chief executive officer. "Despite this top-line pressure, we expect other positive trends, particularly the benefit of our planned share repurchases, to support continued earnings per share growth in 2014."

F-35 Jets

The military has protected large programs such as Lockheed Martin Corp.'s F-35 jet, the Pentagon's most expensive weapons system, from automatic federal spending cuts. Northrop is a key subcontractor on the fighter, booking $1.3 billion in 2012 for F-35 work, according to a regulatory filing.

Congress has helped, too, rebuffing the administration's efforts to end funding for the company's Global Hawk Block 30 surveillance drones.

Lockheed, the top federal contractor, said on Jan. 23 that its fourth-quarter profit dropped 14 percent as U.S. budget cuts sapped its sales and contributed to a goodwill writedown and job-reductions charge.

General Dynamics, Boeing

General Dynamics Corp.'s sales rose less than 1 percent in the quarter to $8.11 billion, a feat in an austere budget environment. The third-biggest U.S. government supplier announced it would buy back more of its stock and forecast higher sales of business jets.

Boeing Co., the second-biggest federal vendor, dropped the most in more than two years yesterday after it forecast profit for 2014 that fell short of analysts' estimates amid a slower pace of jet orders.

Sales for Boeing's defense, space and security unit increased 6.1 percent to $8.86 billion from a year earlier, as the company landed overseas contracts. The segment's performance improved despite defense spending cutbacks in the U.S.

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