Northrop Back in Black, but Analysts Disappointed

Northrop said Tuesday that it earned $21.9 million in the second quarter, up from last year’s second-quarter loss of $15.4 million but still well below Wall Street forecasts.

The aerospace contractor posted sales of $1.35 billion in the quarter, down from $1.42 billion the year earlier. Sales declined in both the aircraft and electronics sectors.

In addition, the company took a $10-million charge against earnings resulting from development problems on electronic countermeasures equipment for the F-15 jet fighter.

“It was not a very good quarter,” said Paul Nisbet, Prudential Bache aerospace analyst.

Wall Street analysts had forecast second-quarter net income averaging about $37 million. Joseph Campbell, an analyst at Paine Webber, said his own estimate was 50% too high even after he had reduced it in the wake of Northrop’s disappointing first quarter.

The disclosure of the F-15 problems means that Northrop now has three troubled electronics programs, including the MX missile guidance system and the Tacit Rainbow anti-radar missile system, Nisbet noted.

The electronics segment posted operating profit of $3.9 million on sales of $228.8 million, whereas it would have earned $25 million if it had had normal profit margins and normal revenue, Nisbet said.

Analysts were generally surprised by a decline in aircraft sales, from $1.12 billion last year to $1.09 billion this year. While the drop could signal that the Stealth bomber program is in transition from development to production. In addition, F-18 jet fighter deliveries have slowed.

An announcement by the company obliquely referred to the bomber program, noting that at least one phase had experienced lower revenues. But it was unclear whether that meant that the overall program had slowed.

Gary Reich with E. F. Hutton in New York, who has been more pessimistic than other analysts about Northrop, said his concern about the B-2, as the Stealth is formally known, is “that if (presidential candidate Michael S.) Dukakis gets elected, there might not be a B-2 program. B-2 is on his hit list.” It is not believed that Dukakis has publicly announced his stand on the B-2.

Meanwhile, the company posted higher operating profit in its aircraft segment, but that reflected a $124.3-million writeoff last year on the Stealth bomber.

Northrop said the Air Force is withholding less than $50 million in funds because of late deliveries of MX missile guidance units, down from a peak of $145 million. The company expects withholding of funds to be eliminated by year-end.