Net income at Northrop increases 3%
Defense contractor Northrop Grumman Corp. reported a 3% increase in third-quarter profit Tuesday, as military and local government demand for its information technology and defense equipment surged.
The company said the strong results indicated that it had nearly recovered from Hurricane Katrina, which caused more than $800 million in damage to its Gulf Coast shipyards last year.
But earnings were offset by a $112.5-million pretax charge for a settlement with the federal government. That prompted Northrop to lower its profit and sales forecast for the full year, and its stock fell in response. Shares slipped $1.13, or 1.6%, to $68.04.
Despite the settlement, analysts remained optimistic about the prospects of the Century City-based maker of warships, unmanned surveillance planes, spy satellites and military electronics.
“This bodes well for the future,” said Paul Nisbet, aerospace analyst for JSA Research Inc., referring to the number of orders the company received in the quarter that ended Sept. 30.
Contract acquisitions, or orders that have been legally agreed upon, were up 25% from a year earlier and 47% year to date. This includes an agreement with New York’s Department of Information Technology to provide the city’s public safety wireless network.
Northrop’s net income rose to $302 million, or 86 cents a share, from $293 million, or 81 cents, a year earlier. Revenue increased 2% to $7.4 billion.
During a conference call with investors and reporters, Chairman and Chief Executive Ronald D. Sugar said he was especially pleased with the steady flow of orders at the company’s four businesses: aerospace, electronics, ships, and information and services.
“This positions us well for a range of similar future opportunities,” he said.
Sugar said Northrop Grumman learned last October of legal claims made by the Justice Department and a classified customer regarding microelectronic parts produced by the former TRW Inc., which Northrop acquired in 2002.
He said Northrop had offered to settle the claims to maintain a good relationship with its customer; the company declined to offer more specifics.
Without the charge, earnings from continuing operations would have been $1.07 a share, in line with the expectations of analysts polled by Thomson Financial.
The company also lowered its guidance for the year, saying it expected sales of $30.2 billion rather than $30.5 billion and earnings per share of $4.20 to $4.25, down about 20 cents. Northrop also plans to pre-fund $800 million of pension obligations in the quarter, which will lower expectations of cash from operations to a range of $1.5 billion to $1.8 billion.
Also Tuesday, No. 1 defense contractor Lockheed Martin Corp. reported that third-quarter net income rose 47% to $629 million.
Revenue at Bethesda, Md.-based Lockheed rose 4% to $9.6 billion.
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