Northrop raises its annual forecast
Northrop Grumman Corp. said Tuesday that it was raising its earnings forecast for the year as a surge in revenue from developing computer and communication systems for state and local governments helped boost second-quarter profit.
Century City-based Northrop now expects year-end earnings at the upper end of its previous forecast of $4.80 to $5.05 a share on revenue of about $31.5 billion.
Northrop, one of the largest private employers in Southern California, with 26,000 workers, is the world’s largest military shipbuilder and the nation’s third-largest defense contractor. It builds nuclear submarines, stealth fighter jets, unmanned spy planes and satellites.
In recent years, it has pushed hard into information technology, developing computer, communication and wireless networking systems for federal, state and local governments. And the move appears to be paying off.
Although Pentagon contracts continue to be its bread and butter, Northrop said that in the second quarter, revenue from its government information-technology business jumped 17%, driven by work it was doing for Virginia, San Diego County and New York City.
The information technology business helped bolster second-quarter results as net income rose to $460 million, or $1.31 a share, from $430 million, or $1.23, a year earlier, beating analysts’ expectations. Analysts on average had expected Northrop to post earnings of $1.24 a share.
Revenue rose 4.3% to $7.93 billion from $7.6 billion a year earlier.
The better-than-expected results came despite a drop in sales at its aerospace and shipbuilding businesses.
Revenue from its aerospace segment, which makes aircraft and satellites, fell 6% to $1.99 billion as several aircraft programs such as the F-35 fighter jet transitioned from development to production.
Ship sales fell 5% to $1.36 billion, partially hurt by a monthlong strike at its Ingalls shipyard in Pascagoula, Miss., that reduced revenue about $50 million.
Despite lower sales at two of its four business segments, Northrop Chairman Ronald D. Sugar said in a conference call with analysts that he was buoyed by recent calls from the Navy to build more ships and no signs of a letdown in Pentagon spending.
“We see a significant positive” for the shipbuilding business, Sugar said.
Separately, Northrop said it had reached an agreement with some of its insurers to recover about $475 million for damage caused by Hurricane Katrina two years ago.
In all, Northrop is hoping to recover about $1.2 billion from its insurers and is in litigation with an insurer for claims of more than $500 million.
Northrop shares fell $1.78 to $77.30 after reaching a 52-week high of $79.26 on Monday.
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