Northrop boosts profit, raises full-year forecast

WASHINGTON Wed Jul 24, 2013 12:49pm EDT

WASHINGTON (Reuters) - U.S. arms maker Northrop Grumman Corp (NOC.N) shrugged off Pentagon budget cuts to report higher-than-expected quarterly earnings on Wednesday and raised its forecast for the full year, driving its shares up nearly 5 percent to a new 52-week high.

The maker of Global Hawk unmanned spy planes and defense electronics also raised its outlook for full-year profitability, although its order backlog was lower.

In the second quarter, higher sales in aerospace and electronic systems more than offset declines in information systems and technical services.

Net profit rose to $488 million from $480 million a year earlier. Per-share earnings jumped to $2.05 from $1.88 due to a 7 percent decline in shares outstanding.

The company said it has repurchased 12.6 million shares this year, part of its goal of buying back 60 million shares by the end of 2015 if market conditions permit.

Second-quarter revenue edged up to $6.29 billion from $6.27 billion.

Analysts polled by Thomson Reuters I/B/E/S had forecast, on average, earnings of $1.70 per share on $5.98 billion in revenues.

(For an interactive graphic on aerospace and defense companies, click on link.reuters.com/rub89t)

Northrop raised its earnings guidance for the full year to a range of $7.60 to $7.80 per share from an earlier forecast of $6.85 to $7.15. It said revenue would likely reach $24.3 billion, up from an earlier forecast of $24 billion.

At the end of June, the company's order backlog was $37.7 billion, down 7.5 percent from December in what analysts said was a sign of harder times to come. Northrop said the decline was mainly due to "reduced customer spending in response to the current U.S. budget environment."

Joe Nadol of JPMorgan, in a note to investors, said the deteriorating backlog was a source of concern, noting that backlog declined in each of the company's four businesses.

As seen at other defense companies, Northrop's operating margins were strong in the second quarter. Overall margin edged slightly higher to 12.8 percent.

The company said it now expects an overall margin of 12 percent for the full year, nearly a full percentage point above the upper range of its earlier forecast.

The aerospace business posted a 9 percent rise in second-quarter sales, largely due to higher volume on the Lockheed Martin Corp (LMT.N) F-35 fighter jet, for which Northrop is a key supplier, and growth in certain unmanned systems.

The electronic systems sector boosted sales by 2 percent and earnings by 17 percent, reflecting continued demand for high-end electronics for international and space programs.

But the information systems division suffered a 9 percent decline in revenue and a 30 percent drop in operating profit, reflecting lower sales and a $27 million reduction in net favorable adjustments from a year earlier.

In technical services, revenue dropped 8 percent and earnings fell 7 percent.

Northrop shares bolted to a new 52-week high of $92.99 in morning trading but then fell back. They stood at $91.48 at midday, up 3 percent.

(Reporting by Andrea Shalal-Esa; Editing by Jeffrey Benkoe and John Wallace)