DOW JONES NEWSWIRES Northrop Grumman Corp.'s (NOC) second-quarter profit dropped 27% as the absence of a prior-year tax benefit offset stronger core earnings driven by cost-cutting. The defense firm also raised its full-year earnings guidance for the second time, forecasting per-share earnings between $6.75 and $6.90, up from its April view of $6.50 to $6.70, though the company slashed its revenue forecast by $500 million to $27 billion. "While sales for the quarter were impacted by several factors, the strong margin rates generated by our businesses largely offset the effects of lower sales," Chairman and Chief Executive Wes Bush said. Costs for both services and products declined in the latest quarter. Northrop is among a handful of major defense contractors that face a looming revenue crunch amid broader Pentagon spending cuts and a shift in military priorities toward smaller, more nimble weapons programs. Cost-cutting has been a common response in the sector. The company in March also spun off its shipbuilding business into Huntington Ingalls Industries Inc. (HII), a move made in the aftermath of the Navy's new 30-year spending plan. Northrop reported a profit of $520 million, or $1.81 a share, down from $711 million, or $2.34 a share, a year earlier. Excluding a prior-year tax benefit and other items, earnings from continuing operations were $1.59, up from $1.46 a share. Revenue fell 9.6% to $6.56 billion. Analysts polled by Thomson Reuters had expected a $1.68 per-share profit with $6.98 billion of revenue. Operating margin widened to 12.8% from 10.3% amid 14% lower product sales costs. The company's aerospace systems segment, its largest business by sales, earned 1.2% less amid an 8.8% sales drop. Sales in the information systems business slid 4.3% while profit fell 7.8%. Shares closed at $65.40 Tuesday and were inactive premarket. The stock has climbed 24% over the past 12 months. -By Drew FitzGerald, Dow Jones Newswires; 212-416-2909; Andrew.FitzGerald@dowjones.com
