By Andrea Shalal-Esa
WASHINGTON Jan 30 Northrop Grumman Corp
, maker of surveillance drones and other military
equipment, on Thursday reported higher-than-expected quarterly
earnings despite a drop in revenues and said share buybacks
would drive earnings per share higher in 2014.
Chief Executive Wes Bush told analysts that a two-year
budget agreement reached by Congress last year reduced some of
the uncertainty that had been hanging over the aerospace and
defense sector, and could stave off worse spending cuts in 2014.
But he said the U.S. budget environment remained
challenging, and the Pentagon's budget for researching or buying
new weapons was likely to remain under pressure into 2015, since
personnel cuts take longer to implement.
International sales, by contrast, continued to grow, helping
to offset declines in U.S. orders, he said. International sales
grew 20 percent to $2.5 billion, or just over 10 percent of
revenue, in 2013 and are expected to expand to about 13 percent
of sales in 2014.
"We see emerging opportunities around the globe that our
portfolio should allow us to address," Bush said, citing demand
for unmanned platforms, airborne surveillance by manned military
aircraft, electronics, cyber, and other offerings.
Bush said the company was making good progress on a program
to build Global Hawk unmanned planes for NATO, and hoped to
finalize a similar deal with South Korea this year.
Northrop shares gained 84 cents to $112.97 on the New York
Stock Exchange around midday.
Northrop's quarterly net profit fell 10 percent to $478
million, or $2.12 per share, in the fourth quarter, from $533
million, or $2.14 per share, a year earlier.
Sales fell 5 percent to $6.16 billion. Sales from the
aerospace business fell 7 percent to $2.43 billion.
Analysts had expected quarterly earnings per share of $1.94
on sales of $6.01 billion, according to Thomson Reuters I/B/E/S.
The company said it expects revenue of $23.5 billion to
$23.8 billion in 2014, with short-cycle businesses likely to be
hit particularly hard. But it said it planned to buy back about
8 percent of shares again in 2014, which would drive earnings
per share higher to $8.70 to $9 a share. Earnings rose 7 percent
to $8.35 per share in 2013.
Northrop also expects to return a "substantial amount of
cash" to shareholders in 2014 as it continues to balance
investments, share buybacks and competitive dividends, Chief
Financial Officer Jim Palmer said.
Northrop repurchased 27.3 million shares for $2.4 billion in
2013, and still had authorization for $3.1 billion in buybacks.
The company said it was about one third of the way to its goal
of retiring 60 million shares of outstanding common stock.
Rob Stallard, analyst with RBC Capital Markets, said
Northrop often beat Wall Street's expectations.
"We think this trend is likely to continue into 2014, and is
particularly positive given the initial EPS guide is 4 percent
above the street," Stallard wrote in an analyst note.