Bloomberg News

Northrop Profit Rises 80%; Forecast Falls Below Estimate

February 03, 2012

(Updates with closing shares in eighth paragraph.)

Feb. 1 (Bloomberg) -- Northrop Grumman Corp., the maker of the U.S. military’s Global Hawk drone, said fourth-quarter profit rose 80 percent and forecast 2012 earnings that fell short of analysts’ estimates.

Net income from continuing operations was $550 million, or $2.09 a share, compared with $306 million, or $1.03, a year earlier, the company said today in a statement. The average estimate of 21 analysts surveyed by Bloomberg was $1.67 a share. Sales fell 5.8 percent to $6.51 billion.

Northrop forecast 2012 profit from continuing operations of $6.40 to $6.70 a share on sales of $24.7 billion to $25.4 billion. Analysts had estimated $6.82 a share on sales of $26.1 billion.

While the results and forecast were disappointing, “Northrop and other defense companies are seeing their profit margins rise because projects they have taken on in the past decade are nearing completion,” Joel Levington, a bond analyst at Brookfield Investment Management Inc. in New York, said in an e-mailed statement.

Northrop’s Chief Executive Officer Wes Bush has divested units that presented a conflict with U.S. rules on contracting or were dragging down the company’s profits. In March 2011, Northrop spun off its $6.7 billion shipbuilding unit as Huntington Ingalls Industries Inc.

Northrop’s remaining businesses include electronics, aerospace, information systems and technical services. Some of its major programs, including the Global Hawk unmanned plane and work on the F-35 Joint Strike Fighter, are coming under U.S. budget pressure.

Pentagon Cutback

The Pentagon has proposed curbing purchases of one version of the Global Hawk because it’s too expensive to operate. The company also is a subcontractor to Lockheed Martin Corp. on the F-35, which is facing delays.

Northrop, based in Falls Church, Virginia, rose 2.1 percent to $59.25 at the close in New York and has declined 7.1 percent in the past 12 months.

For the quarter, sales at the Electronic Systems unit, which makes military radar, declined less than 1 percent to $1.87 billion. Profit fell 5.9 percent to $256 million from $272 million a year earlier.

Sales at the Aerospace unit, which makes the Global Hawk drones, fell 4.1 percent during the quarter to $2.56 billion. Operating income rose less than 1 percent to $325 million from $322 million a year earlier. The unit’s revenue declined partly because of less work on F-35 program as well as reduced funding on weather satellites, Northrop said in the statement.

Sales at the Information Systems unit, which provides computer systems services to military and civilian agencies, declined 8.4 percent to $1.91 billion, Northrop said. Profit increased 10.1 percent to $196 million.

Revenue at the Technical Services unit, which provides logistics and training services, fell 15.1 percent to $675 million and profit rose 14.3 percent to $56 million, the company said.

--Editors: Larry Liebert, Bob Drummond

To contact the reporter on this story: Roxana Tiron in Washington at rtiron@bloomberg.net. Gopal Ratnam in Washington at gratnam1@bloomberg.net.

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net.


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