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Purchase of Shipbuilder Avondale Lifts Litton's 1st-Quarter Profit 5.8%

December 02, 1999|From Bloomberg News

Litton Industries Inc. said Wednesday that fiscal first-quarter net income rose 5.8%, driven by its August purchase of cargo-ship maker Avondale Industries Inc.

Net income for the quarter ended Oct. 31 rose to $49.9 million, or $1.07 a share, from $47.2 million, or $1.01, in the year-ago quarter. Sales rose 14% to $1.37 billion, from $1.21 billion.

The Avondale acquisition strengthened Litton's position as the Navy's third-biggest shipbuilder behind General Dynamics Corp. and Newport News Shipbuilding Inc. It also boosted profit in Litton's shipbuilding division by 67% in the quarter. Operating profit declined in Litton's three other divisions--advanced electronics, information systems and electronic components and materials.

"The performance in shipbuilding was better than expected," said Joseph Nadol, an analyst with Donaldson, Lufkin & Jenrette Inc., which has a "buy" rating on Litton. "They've done a good job at integrating Avondale."

The Woodland Hills-based company's net income included an accounting change for workers' compensation. The change is equal to $2.78 million, or 6 cents a share. The earnings matched the average estimate of $1.07 a share, based on analysts surveyed by First Call.

Litton shares rose $2.81 to close at $47.63 on the New York Stock Exchange. Its shares have fallen 28% so far this year, while the Standard & Poor's 500 index rose 13%.

Litton's stock has dropped because "there's no real growth in the defense budget and commercial airplane demand is down," said Paul Nisbet, an analyst with JSA Research Inc.

That, combined with earnings problems at Lockheed Martin Corp. and Raytheon Co., has caused investors to become leery of investing in smaller aerospace companies such as Litton, he said.

Sales in the advanced electronics division, which provides aerospace and marine navigation and other equipment, fell 15% to $341.6 million in the year-ago quarter while profit fell 3.4% to $28.4 million. The results were hurt by the sale of the company's solid-state division and slowed production as a result of consolidating some businesses.

Revenue in the information system division, which integrates and manages computer systems, rose 2.1% to $404.9 million. Profit was little changed at $20.5 million because of costs associated with leaving some businesses.

Electronic components and material sales rose 6.1% to $161.5 million. Profit for the division that makes electronic connectors and other products fell 5.7% to $24.4 million in part because of increased manufacturing costs.

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