Northrop Grumman profit up 1.7% in 2Q

Falls Church, Va., July 25, 2013--Northrop Grumman reported earnings and revenues that surpassed analysts' expectations, posting a 1.7 percent rise in second-quarter earnings as the defense company posted modestly stronger revenues. Northrop reported a profit of US$ 488 million, or US$ 2.05 a share, up from US$ 480 million, or US$ 1.88 a share, a year earlier.  Revenue increased to US$ 6.29 billion from US$ 6.27 billion a year ago.

For the year, the company raised its per-share earnings estimate to US$ 7.60 to US$ 7.80 on revenue of US$ 24.3 billion, from its previous estimate for per-share profit of US$ 6.85 to US$ 7.15 and sales of US$ 24 billion. Northrop posted second-quarter earnings of US$ 1.97 per share, up from US$ 1.88 a share in the year-earlier period.

Northrop’s profits were unexpected as the company, which builds unmanned aircraft such as the Global Hawk and provides cybersecurity and logistics services, has been streamlining operations for the past several years to cope with leaner defense budgets.

Defense sector revenue remains under pressure from weaker defense spending, which has been compounded by further U.S. government spending cuts known as the sequester that went into force during March. But so far, major defense firms, including Lockheed Martin, appear to be riding out the wave of weakened Pentagon spending.

“Second quarter and year-to-date financial results reflect the hard work and dedication of the entire Northrop Grumman team. As a company, we remain focused on program performance, effective cash deployment and portfolio alignment as we continue to create value for our shareholders, customers and employees,” said Wes Bush, chairman, chief executive officer and president.

Second quarter 2013 total operating income increased US$ 32 million or 4 percent, and operating margin rate increased 50 basis points to 12.8 percent.

As of June 30, 2013, Northrop reported that total backlog was US$ 37.7 billion compared with US$ 40.8 billion as of Dec. 31, 2012. Second quarter 2013 new awards totaled $5.5 billion. The decline in backlog and new awards is primarily due to reduced customer spending in response to the current U.S. government budget environment.

Northrop said its Aerospace Systems segment second quarter 2013 sales increased 9 percent due to higher volume for manned military aircraft, unmanned and space programs. The increase in space sales is due to higher volume for the AEHF and James Webb Space Telescope programs, partially offset by lower volume for restricted programs.

Aerospace Systems second quarter 2013 operating income increased 15 percent and operating margin rate increased 80 basis points to 12.9 percent. The increase in operating income is due to higher sales volume because of improved performance on space programs. 

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