Defense Firm’s Profit Jumps

Northrop Grumman Corp. posted a 44% jump in profit in the second quarter, bolstered by increased sales of military electronics and surveillance equipment.

The Century City-based company said Thursday that net income climbed to $295 million, or 81 cents a share, from $205 million, or 54 cents, a year earlier. Revenue increased 11% to $7.4 billion from $6.6 billion.

Northrop also raised its sales and profit forecasts for the year.

“We’ve had strong performance in the quarter, fared well with [federal] appropriations and have significant opportunities going forward,” said Ronald D. Sugar, the company’s chief executive.

Northrop, with 27,000 workers in Southern California, is the nation’s third-largest defense contractor, behind Lockheed Martin Corp. and Boeing Co. A Northrop spokesman said the company had hired 1,000 workers in the region since the beginning of the year and expected to add another 1,000 by the end of the year.

Sugar said that most of the company’s “key programs are fully funded and some received increased funding” in the fiscal 2005 defense budget, which includes money to make improvements to the B-2 stealth bomber.

In recent months, Pentagon officials have also upped orders for portable computers -- developed by Northrop engineers in Carson -- that U.S. troops can use to locate targets in Iraq. The success of its Global Hawk unmanned spy plane in Afghanistan and Iraq led the Pentagon to order more equipment for the aircraft.

Revenue grew across all of Northrop’s businesses, Sugar said, with the biggest jump in its Mission Systems business, which designs battlefield-management computer software and equipment. The division’s sales rose 18% to $1.3 billion, with operating profit of $86 million, up from $78 million.

Sales of surface ships and nuclear submarines to the U.S. Navy shored up results for Northrop’s shipbuilding business, which posted a 14% increase in sales to $1.56 billion; the unit’s operating profit rose sharply to $100 million, from $23 million a year ago.

Thanks to the favorable defense budget, Northrop said it was raising the company’s growth estimates for the year. It now expects 2004 sales to be about $29 billion, up about $1 billion from previous forecasts, and for earnings to range from $2.90 to $3 a share, up about 10 cents.

Northrop’s second-quarter earnings per share bested Wall Street estimates by about 4 cents.

But the company’s shares dropped 95 cents to $52.75 on the New York Stock Exchange on Thursday, a day when most major defense stocks rose.

Analysts said investors might have been spooked by a $60-million, pre-tax charge against earnings to reflect increased expenses on the company’s F-16 fighter jet program.

Northrop is developing the avionics for the latest version of the aircraft, but it has faced technical problems and cost overruns.

“As people dug more into the [earnings] release, they got nervous that this may not be the end of the F-16 charge,” said Eric Hugel, a defense analyst for Stephens Inc.

Sugar said the charge was the “only negative for the quarter.”

A lower tax rate and reduced pension costs contributed to Northrop’s improved second-quarter results.