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Profits rise at Boeing, Northrop in first quarter despite lower revenue

Earnings are up 13% at Boeing and 21% at Northrop Grumman for the quarter, but sales decline at both aerospace companies.

April 28, 2011|By W.J. Hennigan, Los Angeles Times

Two of the nation's largest aerospace companies reported rising profits in the first quarter despite a slip in revenue. Boeing Co. said its earnings climbed 13% and Northrop Grumman Corp. posted a 21% jump in profit.

Northrop and Boeing are among the largest private employers in the state. Northrop has about 30,000 employees in California and Boeing has about 22,000. Each operates a large military-related business in Southern California.

Northrop said Wednesday that it earned $496 million, or $1.67 a share, in the quarter, up from $410 million, or $1.34, a year earlier. The company exceeded analysts' expectations of $1.56 a share.

The Century City aerospace giant, which has massive facilities in Redondo Beach, El Segundo and Palmdale, experienced a 3% drop in sales to $6.7 billion.

Northrop saw sales decline in three out of four business units. The company's technical services, electronics and information systems all posted losses. Its largest unit, aerospace systems, which makes fighter jets and robotic spy planes, saw a modest 1% sales jump to $2.7 billion.

The company was able offset lower sales and through tightening its spending, which has included layoffs. Northrop began the year with 500 fewer employees in its aerospace division, with most of the cuts hitting the El Segundo and Redondo Beach plants.

Northrop cited an anticipated slowing in Pentagon spending for the cutbacks as the federal government grapples with rising budget deficits. After several years of heady growth amid one of the biggest military buildups in decades, most analysts are now expecting a long stretch of cuts in weapon purchases.

In a conference call with analysts, Chief Executive Wesley G. Bush said Northrop's goal is to maintain profitability and brace for a pullback in spending from its biggest customer, the U.S. government.

"I would reiterate that we continue to position the company for an increasingly competitive and challenging environment," he said. "Deficit reduction is becoming a higher priority for our national leadership as deficit and debt levels are widely expected to be unsustainable.... Our challenge is to continue to anticipate the needs of our customers and aggressively address our cost structure, operational execution and productivity."

Also during the quarter, Northrop spun off its shipbuilding unit into a separate company, called Huntington Ingalls Industries Inc., to focus on businesses that offer higher profit margins.

Northrop increased its forecast for full-year earnings to $6.50 to $6.70 a share, up from $6.40 to $6.60.

Meanwhile, Chicago-based Boeing reported a profit of $586 million, or 78 cents a share, up from $519 million, or 70 cents, a year earlier. The company also exceeded analysts' earnings expectations of 72 cents a share.

Boeing, which has defense and space facilities in El Segundo, Huntington Beach and Long Beach, saw sales fall 2% to $14.9 billion.

The company, which also manufactures jets for airlines, said commercial aircraft deliveries dropped 4% to 104 in the first quarter from a year earlier.

Boeing shares rose 57 cents Wednesday to $76.12 and Northrop shares rose 41 cents to $62.90.

william.hennigan@latimes.com

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