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Northrop Grumman profit rises 1.4%

The defense contractor manages to increase sales 4% while bracing for Pentagon spending cuts.

October 28, 2010|By W.J. Hennigan, Los Angeles Times

Northrop Grumman Corp.'s earnings inched up 1.4% in the third quarter as the nation's third-largest military contractor said it was bracing for a protracted stretch of cuts in Pentagon spending.

In a conference call with analysts Wednesday, Northrop Chief Executive Wesley G. Bush said the Century City-based company has been positioning itself for the pullback and hinted that there may be more layoffs in the months to come.

Last month, Northrop announced that it was eliminating 500 jobs in its aerospace division, with most of the cuts expected at its facilities in Redondo Beach and El Segundo.

"As we look ahead to next year, we would expect U.S. defense spending to be flat to low single-digit growth," he said, adding that the company "fully understands the challenges and we'll continue to make the difficult decisions and take the actions necessary."

A quarter of Northrop's worldwide workforce — about 30,000 employees — is in California, with the vast majority of those workers in the Southland.

"Everybody in the defense industry is expecting a slowdown at this point," said Wayne Plucker, an aerospace analyst with the research firm Frost & Sullivan. "From the small supplier to the industry behemoths, they're all feeling it."

Nonetheless, Northrop said that while Pentagon spending was slowing it still grew in the third quarter, when all but one of the company's five business units saw sales increases.

Overall sales rose about 4% to $8.7 billion.

Sales were bolstered by the company's largest unit, aerospace systems, which makes fighter jets and robotic spy planes. The division's sales rose 7% to $2.7 billion.

Information systems was the exception. The company won fewer contracts from local and state governments for computer services, causing revenue to remain flat in the quarter.

Northrop reported net earnings of $497 million, or $1.67 a share. That's up from $490 million, or $1.53, in the same quarter last year. Analysts, on average, had expected $1.46 a share.

The better-than-expected results led Northrop to bump up its 2010 earnings estimates by 15 cents, to $6.85 to $7 a share. It is the third straight quarter that the company has increased its estimates.

Northrop's shares rose 3 cents to $61.38.

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