Northrop posts 16.7 percent profit rise, raises full-year forecast

October 26, 2016 6:55 AM EDT

A UAV helicopter build by Northrop Gruman is on deck aboard the soon to be commissioned littoral combat ship USS Coronado during a media tour in Coronado, California April 3, 2014. REUTERS/Mike Blake/File Photo


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By Ankit Ajmera and Mike Stone

(Reuters) - U.S. weapons maker Northrop Grumman Corp (NYSE: NOC) reported a 16.7 percent rise in quarterly profit on Wednesday, helped by higher sales in its aerospace systems business that makes the center fuselage of the F-35 fighter jets.

Northrop shares hit an all-time high of $229.45 and were still up 3.9 percent at $228.10 in afternoon trading.

Last October, Northrop won the contract to produce the "Raider," the U.S. Air Force's new B-21 long-range bomber. The estimated $80 billion program, expected to produce 100 aircraft, has been shrouded in secrecy since its inception. It is expected to have aircraft ready for combat no sooner than 2025.

The maker of Global Hawk surveillance planes raised its 2016 earnings forecast for the third time this year to a range of $11.55 to $11.75 per share from $10.75 to $11.00. In January, Northrop estimated that 2016 EPS could be between $9.90 and $10.39.

The company now expects full-year sales of $23.9 billion to $24.1 billion, up from $23.5 billion to $24.0 billion.

Analysts, on average, expect 2016 earnings of $11.05 per share, on revenue of $23.82 billion, according to Thomson Reuters I/B/E/S.

Northrop's earnings came a day after Lockheed Martin Corp (NYSE: LMT) reported better-than-expected results and lifted 2016 forecasts, partly due to higher sales from the F-35 program.

The F-35 is the Pentagon's costliest arms program. The U.S. Defense Department expects to spend $391 billion to develop the plane and buy 2,443 of the supersonic, stealthy new warplanes in the coming decades.

Northrop makes the center fuselage for the F-35, which forms a significant portion of the aircraft's internal weapons bay and internal fuel capacity.

Third-quarter revenue at Northrop's aerospace systems business increased 9.4 percent to $2.78 billion.

Help came from increased sales in the F-35 business and increased buying in top-secret programs as well as sales of autonomous systems.

Northrop CFO Ken Bedingfield told analysts on a conference call that the F-35 program now represents about 7 percent of revenue. CEO Wes Bush added that once F-35 production achieves full capacity, the profitability of that program should grow.

Northrop's third-quarter net earnings rose to $602 million, or $3.35 per share, from $516 million, or $2.75 per share, a year earlier. (http://bit.ly/2eR8BSK)

The profit included a federal tax benefit of $42 million, or 23 cents per share.

Total sales rose 2.9 percent to $6.16 billion.

So far this year Northrop's shares have risen more than 20 percent.

(Reporting by Ankit Ajmera in Bengaluru and Mike Stone in Washington; Editing by Jeffrey Benkoe and Matthew Lewis)



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