Northrop Grumman 1Q profit drops 32 percent
Northrop Grumman Corp. said Thursday first-quarter earnings fell 32 percent as the company was forced to take a charge due to rising costs and delays with an amphibious assault ship program it is building for the U.S. Navy.
The Los Angeles-based company also lowered its profit estimates for the full year, although it beat Wall Street estimates for the quarter, boosting its shares.
Northrop Grumman reported net income of $264 million, or 76 cents per share, in the quarter ending March 31. That compares to earnings of $387 million, or $1.10 per share, in the year-ago period.
Revenue for the quarter rose 6 percent to $7.72 billion from $7.34 billion.
Analysts expected the company to post earnings of 63 cents a share on sales of $7.7 billion, according to a Thomson Financial poll.
Northrop shares rose $3.07, or 4.4 percent, to $72.55.
Results were hurt by a pretax charge of $326 million, or 61 cents per share, related to the problems with the LHD-8 amphibious assault ship program. The company had previously warned that wiring problems with the ship would delay delivery by six months.
The LHD-8 ship, the Makin Island, is being built in Pascagoula, Miss., and has been plagued by costly delays. The company took a $55 million charge in the second quarter of 2007 due to problems with the project.
Management said it expects the LHD-8 to be ready for delivery in the second quarter of 2009.
“Although the LHD-8 charge is deeply disappointing, the remainder of our first quarter performance was strong,” Chief Executive Ronald D. Sugar said during a conference call with Wall Street analysts. “Looking ahead, we are winning major competitions, generating report backlog, growing our sales, expanding our margins and executing our balanced cash deployment strategy.”
Northrop Grumman estimated its full-year profit will range between $4.90 and $5.15 per share, down from prior estimates. The company reiterated its 2008 sales would hit $33 billion.
Northrop said it received $12.1 billion in funded contracts during the quarter. That brought its total backlog of funded and unfunded orders to $68.1 billion as of the end of March.
Higher defense contract volume from established Northrop programs, such as the remotely piloted Global Hawk aircraft, and newer offerings, such as the KC-45 refueling tanker, helped drive sales growth during the quarter.
Excluding the company’s Gulf Coast shipyard operations, Northrop saw growth across all business segments.
Northrop’s information and services division generated sales of $3.1 billion, a 6 percent jump from the year-ago quarter.
Growth in the segment was driven by an increase in sales for intelligence, surveillance and reconnaissance programs, among others.
Sales in its aerospace unit rose 4 percent to $2.1 billion, while the electronics division saw sales increase 2 percent to $1.5 billion.
The aerospace segment’s sales were led by increased demand for programs such as the Global Hawk and the KC-45, offsetting weaker sales for other programs, including the F-35 aircraft and E-10A radar.
The company’s shipbuilding division generated sales of $1.3 billion, up 9 percent from a year earlier largely due to higher demand for surface combatant and fleet support programs.
The segment recorded a $218 million operating loss during the quarter compared to income of $79 million a year earlier.
Among the new contracts won by Northrop during the quarter was a $35 billion order from the U.S. Air Force for 179 of Northrop’s KC-45 tanker aircraft. Northrop beat out Boeing Co., which has filed a formal protest of the Air Force decision with the Government Accountability Office. A ruling on the matter is expected by June 19.
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