(Reuters) - U.S. weapons maker Northrop Grumman (NOC.N) joined peer General Dynamics Corp (GD.N) in raising concerns over Congress’ failure to pass a federal budget, even as it posted better-than- expected quarterly results.
Northrop’s shares rose as much as 4 percent to a record high on Thursday after the company reported a 3.7 percent rise in fourth-quarter sales, boosted by higher sales in its businesses that make parts for F-35 fighter jets.
Northrop did not specify if its fourth-quarter results were affected by slow government action, but flagged concerns at customers.
“We’re about a quarter away through the fiscal year. And if as challenging as this might be on the industry side, the real pain here, and I mean, Pain with a capital P, is on our customers’ side,” Northrop Chief Executive Wesley Bush said on a post-earnings call.
“This has gotten to a ridiculous point and we’ve got to get it solved,” he said.
General Dynamics was more critical of the government, blaming Congress’ use of Continuing Resolutions in lieu of a federal budget on Wednesday for missing analysts’ sales expectations.
Northrop reported sales of $6.63 billion for quarter ended Dec. 31, beating the average analyst estimate of $6.35 billion. (bit.ly/2DBxzFn)
The company, which said it expects lower tax rate to boost its profit in 2018, forecast 2018 earnings of $15.00 to $15.25 per share, above the average estimate of $14.23.
The maker of Global Hawk surveillance planes expects full-year revenue of about $27 billion versus expectations of $26.91 billion.
However, Northrop said its 2018 segment operating margin would be in the low- to mid-11 percent range, largely below the 11.5 percent reported in the year ended Dec. 31.
“There is likely some conservatism in the margin guidance, but this may also be driven by new business wins, which typically have lower margins in the early stages,” Jefferies analyst Sheila Kahyaoglu wrote in a note.
Northrop, like its peers in the United States, is benefiting from higher demand for weapons, fighter jets and tanks amid heightened security concerns and is expected to gain from an increase in U.S. defense spending under President Donald Trump’s administration.
Net income fell 66.1 percent to $178 million, hurt by a higher tax expense and $500 million pre-tax pension contribution.
Excluding items, Northrop earned $2.82 per share, beating the Wall Street estimate of $2.74.
Reporting by Ankit Ajmera and Aishwarya Venugopal in Bengaluru; Editing by Supriya Kurane and Saumyadeb Chakrabarty