(Adds details from analyst call, closing share price)
By Andrea Shalal
WASHINGTON, April 23 U.S. weapons maker Northrop
Grumman Corp on Wednesday reported a
higher-than-expected quarterly profit and raised its earnings
forecast, despite a drop in sales and continued concerns about
cuts in U.S. military spending.
Northrop, which makes unmanned planes, the B-2 bomber and a
host of electronic equipment, said net income rose to $579
million, or $2.63 per share, in the first quarter from $489
million, or $2.03 a share, a year earlier.
First-quarter earnings included a tax benefit of $51 million
or 32 cents per share, that stemmed from a partial resolution of
a federal examination of Northrop's 2007 to 2009 tax returns.
Excluding the tax benefit, earnings per share would have
risen 7 percent to $2.31, but that still topped the $2.15 per
share expected by analysts polled by Thomson Reuters I/B/E/S.
The company's shares closed $1.87 or 1.6 percent higher at
$121.66 on the New York Stock Exchange.
Chief Executive Officer Wes Bush said the remaining rise in
earnings per share was due to the company's performance and
stock repurchases. Northrop had about 9 percent fewer shares
outstanding during the latest quarter.
Operating margins hit 14.4 percent, up 2 percentage points
from the year-earlier period.
Bush told analysts on an earnings call that he remained
concerned about mandatory U.S. budget cuts due to resume in
fiscal year 2016. But he said the company had good opportunities
to capture additional U.S. orders and new foreign orders.
Rob Stallard, analyst with RBC Capital Markets, said he
expected further positive results this year, but saw bigger
opportunities elsewhere in the defense sector given Northrop's
small export business and limited commercial business.
Revenue dropped about 4 percent to $5.84 billion, in line
with Wall Street expectations, and reflected cuts in U.S.
military spending across the industry.
Revenue fell in all four of the company's divisions -
aerospace, electronic systems, information systems and technical
services. Operating income rose 20 percent in the aerospace
sector due to a $48 million increase in net favorable
adjustments, which more than offset lower sales.
The company raised its earnings-per-share outlook for the
full year to a range of $8.90 to $9.15. Its previous forecast
was $8.70 to $9.00.
It forecast a full-year operating margin of about 13
percent, compared with an earlier forecast of 12 percent.
Northrop affirmed its forecast that revenues would fall to
$23.5 billion to $23.8 billion in the full year from $24.7
billion in 2013.
Bush said that about 80 percent of the company's revenues
would flow from the existing backlog, which totaled $36.2
billion at the end of the quarter, a slight drop from $37
billion at the end of 2013.
The company repurchased 4.8 million shares in the first
quarter and said it was more than a third of the way to its goal
of retiring 60 million shares by the end of 2015, market
(Reporting by Andrea Shalal; Editing by Lisa Von Ahn and