October 22, 2008 / 2:47 PM / in 9 years

Defense contractors profits rise

NEW YORK (Reuters) - Defense contractors Northrop Grumman Corp (NOC.N) and General Dynamics Corp’s (GD.N) quarterly earnings beat Wall Street forecasts, showing few signs that U.S. defense spending will slow, despite the uncertainty of a new administration and a tight federal budget.

The defense unit of Boeing Co (BA.N) also posted higher quarterly profit on Wednesday, partly offsetting the effects of a six-week strike at its commercial plane plants, which dragged down its overall quarterly profit.

Northrop and General Dynamics shares rose, while Boeing fell 7.6 percent.

“If Boeing’s commercial aircraft production goes through a cyclical downturn as we project, then the defense side of the business is set to be an increasingly important part of earnings,” said Macquarie Securities analyst Robert Stallard.

Northrop and General Dynamics, the U.S. No. 3 and 4 defense contractors, respectively, after Lockheed Martin Corp (LMT.N) and Boeing, both posted higher earnings on strong sales of military equipment.

Northrop, which makes bombers, warships and a range of military electronics, reported a better-than-expected 5 percent increase in third-quarter profit, helped by better results from its electronics unit.

The Los Angeles-based company reported earnings of $1.50 per share, excluding one-time items, while Wall Street was expecting $1.41, according to Reuters Estimates.

Northrop raised its full-year earnings-per-share outlook to a range of $5.10 to $5.20. It previously had forecast $4.90 to $5.15. Wall Street is expecting $5.12, on average.

    General Dynamics reported a 16 percent rise in third-quarter profit, helped by sales of submarines, ships and its Gulfstream business jets.

    Earnings increased to $634 million, or $1.59 per share, beating the analysts’ average forecast of $1.51.

    Northrop shares were up 4.6 percent at $46.91 in morning trading. General Dynamics, which is expected to update its outlook later in the day, saw its shares gain 1.9 percent to$56.55.

    Boeing’s defense unit, which is the Pentagon’s No. 2 supplier, reported operating profit of $854 million, up 4 percent from $822 million a year earlier. The increase, which was better than most analysts expected, stemmed largely from higher sales of network and space systems.

    The company said it expected U.S. defense spending growth, the key driver of its military business, to “moderate”, but it would focus on keeping its own programs on track.

    Reporting by Bill Rigby; Editing by Lisa Von Ahn

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