Northrop Grumman Corp.'s (NOC) third-quarter earnings rose 8.3%
as stronger operating margins and a lower tax rate offset a modest
decline in the defense contractor's revenue.
For the year, the company raised its per-share earnings estimate
to $8 to $8.15 and sales of $24.4 billion, from its previously
increased estimate for a per-share profit of $7.60 to $7.80 and
sales of $24.3 billion.
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 and concerns about any further cuts in the
future.
The fifth-largest U.S. military contractor by sales, 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.
Northrop Grumman in August agreed to buy the defense unit of
Australian flag carrier Qantas in a deal that highlights the drive
for defense contractors to boost revenue and their international
exposure at a time of declining global military budgets.
Northrop Grumman reported a profit of $497 million, or $2.14 a
share, up from $459 million, or $1.82 a share, a year earlier.
Excluding pension-adjustment impacts, adjusted earnings from
continuing operations were up at $1.97 from $1.73.
Revenue decreased 2.6% to $6.1 billion as sales declined at
three of its four business segments. Electronic systems, where
sales rose 4%, was the exception.
Analysts polled by Thomson Reuters recently expected per-share
earnings of $1.82 and revenue of $5.96 billion.
Operating margin rose to 12.9% from 11.7%. The company's
effective tax rate was 31%, compared with 43% a year earlier.
At quarter's end, Northrop Grumman's total backlog was $37.5
billion, compared with $41 billion reported a year earlier and
$37.72 billion at the end of the second quarter.
The company said the decrease in backlog was mostly owing to
tight U.S. budgets and information systems adjustments of $1
billion to reduce unfunded backlog for expired periods of
performance on active contracts.
Shares were up 54 cents $102 in light premarket trading. Through
the close, the stock is up 50% this year.
Write to Tess Stynes at tess.stynes@wsj.com
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