Though still a mid-tier player in a league of aerospace giants, Northrop Grumman Corp. keeps tweaking its operations in search of faster growth--and Wall Street is finally taking notice.
Long thought an obvious takeover target amid the defense industry's merger craze of recent years, Northrop Grumman in the meantime is busy making niche acquisitions itself to focus less on aircraft building and more on electronic-warfare gear, information systems, radars and sensors that use cutting-edge technology.
The Century City-based company is confident those areas will stay high on the Pentagon's priority list, rekindle its own sluggish sales and earnings growth and help it adapt more smoothly to the winding down of its most controversial program, the B-2 stealth bomber, which is built in Palmdale.
And now Northrop Grumman, led by Chief Executive Kent Kresa, is mulling another step in that strategy: shedding its commercial aerostructures business, which makes fuselages for the Boeing 747 jumbo jet and other major parts for airliners and executive jets. One of its big plants is in Hawthorne, which employs about 1,000 people.
Caryle Group, a privately held Washington firm that holds stakes in several aerospace firms, is reportedly one of the suitors for the business, but Northrop Grumman so far has not elaborated beyond its statement Monday that it's "exploring its strategic alternatives" for the unit.
Kresa declined to comment pending Northrop Grumman's first-quarter earnings announcement due Monday. But he's said he looks for "solid growth in both sales and earnings" starting in 2001.
The aerostructure group's prospective sale again bumped up Northrop Grumman's stock, and now the shares have surged 49% in just the past five weeks. The stock, which in prior years had badly lagged not only its peer group but also the broader stock market, gained another $1 a share, to $64.81, in New York Stock Exchange composite trading Tuesday.
The nation's fifth-largest defense contractor, Northrop Grumman previously has conceded that it doesn't see sizable long-term growth for the commercial aerostructures line, whose problems last year included production snags at Boeing. The division accounted for $1.4 billion of Northrop Grumman's overall 1999 revenue of $9 billion.
In fact, the company's annual revenue has been stuck around $9 billion for the past few years, but Wall Street is looking ahead for better earnings gains from Northrop Grumman's restructurings--and at the potential that Northrop Grumman might get acquired.
