Northrop profit tops estimates, forecast raised
Northrop Grumman Corp., the third- largest U.S. defense contractor, posted quarterly profit from continuing operations that exceeded analysts' estimates and boosted its full-year earnings forecast.
Locally, Northrop has operations in Rolling Meadows.
Income from continuing operations was $1.52 a share, including a one-time tax benefit of $75 million, or 23 cents a share, the Los Angeles-based company said in a statement today. Analysts surveyed by Bloomberg had estimated profit excluding some items of $1.18 a share.
Northrop raised its profit forecast for the year to $5 to $5.15 a share from an earlier projection of $4.65 to $4.90. The average estimate of 19 analysts was $4.86.
"The beat and raise from Northrop is a pleasant surprise, as the company has struggled recently with writedowns in its ships segment," Robert Stallard, an analyst at Macquarie Capital Inc., wrote in a note to clients today. He has a "neutral" rating on the stock.
Shipbuilding "offers the largest opportunity to create value for shareholders," Chief Executive Officer Ron Sugar said in a telephone interview. "We are putting a tremendous amount of attention, making improvements necessary in the operating systems to make that business more valuable and predictable."
Northrop fell 20 cents to $49.59 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 10 percent this year.
Net Income
Net income for the three months through September declined to $490 million from $512 million a year earlier, Northrop said. On a per-share basis, profit rose to $1.53 from $1.51 after the number of shares outstanding decreased. Sales rose 4.1 percent to $8.73 billion.
Pension adjustments reduced profit from continuing operations by $47 million, or 15 cents a share, compared with an increase of 13 cents a share in the prior-year period. Reduced operating income in Northrop's shipbuilding and electronic- systems units also lowered profit in the most recent quarter. Wes Bush, who will succeed Ron Sugar as chief executive officer in January, has said the shipbuilding business may continue to face challenges in the remainder of 2009.
Revenue increased at all of Northrop's five units, while operating income declined 18 percent in the electronic systems unit and 4.2 percent in shipbuilding, the company said.
The electronic systems business, maker of airborne radar for the F-35 Joint Strike Fighter, had "lower performance on government systems programs," the company said in the statement. In the year-ago period, the unit had benefited from a $40 million patent-infringement settlement, Northrop said.
Aerospace Unit
Aerospace sales rose 4.6 percent to $2.53 billion in the quarter. Northrop's contract victories in the period included beating Boeing Co. for a $3.8 billion order to maintain the Air Force's KC-10 refueling tanker-fleet. Northrop will maintain the 59-tanker fleet for nine years.
Operating income at the information-systems business, which provides network communications systems and cyber-security products to defense and civilian government agencies, rose 32 percent to $206 million, the company said.
Lockheed Martin Corp. is the world's largest defense company, and Boeing is the second-largest U.S. military contractor.
Boeing's defense business, which accounts for more than half the Chicago-based company's revenue, posted a 2.9 percent sales gain to $8.74 billion and a 3.6 percent increase in profit to $885 million.
The unit has a "weaker outlook" than competitors because the company is on the wrong set of programs as the Pentagon curbs spending, Douglas Harned, a Sanford C. Bernstein & Co. analyst in New York, wrote in a note today. The Defense Department has canceled parts of Boeing programs and scaled back others.