Northrop Forecasts 5 Years of Growth
Northrop Grumman Corp. Chairman Kent Kresa said Wednesday that the company would post double-digit growth in annual earnings over the next five years as the defense budget grows.
Speaking at Northrop’s annual shareholder meeting in Santa Monica, Kresa said he expects the company to post $6.60 to $7.10 a share in operating earnings this year, up 13% to 21%, with a similar increase in 2003.
He predicted that defense procurement and spending on research and development would increase 8% to 9% annually in the next five years. “There will be close to double-digit growth for the industry over the next five years, and we have structured the company to those particular needs. We’re in the sweet spot of what will be needed in the future.”
Kresa also told shareholders that the company is optimistic about reaching an acquisition agreement with TRW Inc. and expects to begin conducting due diligence of TRW’s operations next week as it considers raising its bid for the Cleveland-based defense and auto parts company. Century City-based Northrop, which made a hostile $5.7-billion bid for TRW, is hoping to obtain a friendly deal.
The shareholder meeting at the Fairmont Miramar Hotel in Santa Monica was a far cry from the early 1990s, when Northrop appeared destined to be a two-bit defense player as its B-2 stealth bomber continually faced budget cuts.
A decade later, Northrop is poised to become the nation’s second-largest defense contractor, with interests in virtually every aspect of the military, including stealth bombers, aircraft carriers, spy satellites and submarines, at a time when defense spending is expected to see its biggest increases in nearly two decades.
“This is a substantial change from what we’ve been living with in the 1990s,” said Kresa, who took the helm in 1990.
To shareholders, it seemed all the more appropriate that the company would unveil a flashy video showcasing Northrop’s businesses with the theme song from the movie “Flashdance.”
The song, “What a Feeling,” seemed to be about the decade-long travails of Northrop and its longest-tenured chief. It starts with a slow, downbeat tone as the singer laments being alone and “full of pride in a world made of steel,” and then it builds a crescendo to “I can have it all now I’m dancing for my life.... What a feeling!”
“Wow,” said Kresa, who was seeing the video for the first time. “That’s impressive, even for me.” Kresa, 64, will reach the mandatory retirement age in March.
Northrop shares fell $1.74 to $121.84 on the New York Stock Exchange. They are up 21% this year.
