Northrop Grumman 3Q profit up 5 pct

[October 26, 2011]  ST. LOUIS (AP) -- Northrop Grumman says its third-quarter profit rose 5 percent despite declining revenue as profit margins improved. The results beat analyst expectations and the company raised its full-year profit outlook.

The Falls Church, Va., defense contractor says it earned $520 million, or $1.86 per share, in the July-September quarter. That's up from $497 million, or $1.67 per share, during the same period last year. Revenue fell 6.5 percent to $6.61 billion, from $7.07 billion last year.

The net income results beat expectations, although revenue was below forecasts. Analyst polled by FactSet had expected a profit of $1.68 per share on $6.82 billion in revenue.

Northrop's operating profit climbed, even as sales fell, because of a $101 million gain due to a pension effect.

Stripping out the effect of the pension, operating income was almost unchanged from a year ago.

Shares fell $2.68, or 4.7 percent, to $53.89 in early morning trading.

Defense spending is growing more slowly as the government tightens its belt and the U.S. military reduces its presence in Iraq and Afghanistan. Spending is expected to decline further. The Pentagon is slated to cut $450 billion in spending over 10 years.

Revenue fell 5 percent in Northrop's biggest division, aerospace, and dropped 8 percent in its information systems and 22 percent in its technical services businesses. Sales rose 2 percent in its electronic systems unit.

Still, Northrop raised its outlook for 2011 to earnings between $6.95 per share and $7.05 per share, saying it expects higher margins and a lower average share count. That's up from its previous estimate of between $6.75 per share and $6.90 per share. Analysts had expected net income of $6.88 per share.

The company spent $1.6 billion buying back stock during the quarter. Such share buybacks increase the income available to the remaining public shareholders. Northrop says it has $2.4 billion left under its current program to buy back more stock.

[Associated Press; By CHRISTOPHER LEONARD]

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