Northrop Grumman Corp posted better-than-expected earnings, aided by a tax benefit, lower share count and strong sales, and the defense contractor raised its full-year forecast, sending its shares up nearly 3 %.
Net income fell 4 % to $490 million, or $1.53 a share, from $512 million, or $1.51 a share, a year earlier.
On a continuing operations basis, earnings were $1.52 a share. Analysts had expected $1.18, according to Thomson Reuters I/B/E/S.
“The beat and raise from Northrop is a pleasant surprise, as the company has struggled recently with write downs in its Ships segment,” Macquarie Securities analyst Rob Stallard said in a note to clients.
Results were aided by a tax benefit of 23 cents a share tied to the settlement of an Internal Revenue Service examination of previous annual returns.
Quarterly revenue rose 4 % to $8.73 billion, compared with $8.58 billion that analysts expected.
The Los Angeles-based maker of warships and military electronics said it expected full-year earnings per share of $5.00 to $5.15, compared with a previous forecast of $4.65 to $4.90. Analysts have been expecting $4.85.
Last month, Northrop Grumman said that company President Wes Bush would take over as chief executive officer in January from Ronald Sugar, who will stay on as an adviser until June.
Wall Street is concerned that defense companies will underperform as President Barack Obama reduces spending on traditional weapons and slows growth in the US defense budget.
Northrop Grumman is also trying to turn around its ship manufacturing, where quality issues have resulted in quarterly charges.
During the third quarter, the shipbuilding unit had a 14 % rise in sales, but operating profit declined 4 %, reflecting higher production costs.
Among other business segments, electronic systems operating profit fell 18 percent in the quarter, and Northrop cited “lower performance for government systems programs.”
Lockheed Martin Corp, the top Pentagon supplier, posted a better-than-expected quarterly profit but gave a 2010 forecast that was below Wall Street estimates, sparking a sell-off in its shares.
Northrop Grumman shares were up 2.7 % at $51.15 in morning New York Stock Exchange trading. Lockheed, which was downgraded by brokerages Collins Stewart and Morgan Keegan, was off 2.3 % at $70.35.
Pic: North Grumman logo