* Profit $2.03/share vs Wall St forecast $1.74
* Sales $6.1 billion vs year-earlier $6.2 billion
By Andrea Shalal-Esa
WASHINGTON, April 24 Northrop Grumman Corp
reported higher-than-expected first-quarter earnings and
sales on Wednesday and stood by its previous forecast for the
full year despite what it called "an uncertain and constrained
Northrop, one of the largest U.S. weapons makers, reported
net earnings of $489 million, or $2.03 per share, compared with
$506 million, or $1.96 per share, a year earlier.
Revenue dipped to $6.1 billion from $6.2 billion.
Analysts polled by Thomson Reuters I/B/E/S had forecast
earnings of $425 million, or $1.74 a share, on sales of $5.96
Chief Executive Wes Bush said operating performance was
strong across the board in the quarter, but he warned that
across-the-board defense budget cuts known as sequestration
would have a negative impact on revenues in 2014.
"Looking ahead, we recognize that we are operating in an
uncertain and constrained budget environment," he said in a
statement, underscoring Northrop's focus on executing contracts,
deploying cash effectively and aligning its portfolio.
He told analysts the company had already consolidated
facilities, cut staffing and reduced overhead costs wherever
possible. Now it was aggressively tackling cost at a more
detailed level by looking closely at new and existing contracts.
Bush told analysts the company during an earnings call that
he did not expect cancellation of any significant Northrop
programs in fiscal 2013, but continuing uncertainty about future
budget cuts could weigh on bookings this year.
Sales and bookings in the third and fourth quarters would
help clarify the outlook for 2014, Bush said. "It is very likely
this is going to negatively impact sales in 2014," he said. "To
think that the sequester somehow dissipates and goes away and
doesn't impact the future is putting your head in the sand."
Bush said a broader strategic review initiated by Defense
Secretary Chuck Hagel would also help inform future budgets.
The company repurchased 6.5 million shares during the
quarter, reducing its outstanding shares by 7 percent. It has $1
billion left on its current repurchase authorization.
Backlog at the end of the quarter was $39.4 billion,
compared with $40.8 billion as of Dec. 31, 2012.
Asked about Northrop's interest in adjacent markets, Bush
said it was important to look at ways of creating value, but
signaled his reluctance to get too far afield from core areas.
"The experience of our industry suggests that the longer you
have to stretch out your tape measure to measure how adjacent it
is, the less likely it is you're going to really create value,"
Bush told analysts. "We look at it but it's not the primary
motivator of our strategy obviously. We're a global security
company and we keep that in mind.
Bush said cyber was one growing rapidly as a business area
and generating double-digit growth, although he said it was
still difficult to define exactly what that term meant.
He welcomed the Obama administration's proposal to spend a
total of $13 billion on cyber programs in fiscal 2014. The field
included many aspects of electronic warfare but continued to
evolve, which tentacles "increasingly intertwined in just about
every other component of the defense architecture."