Northrop earnings dip, but exceed estimates

Investment income helps first quarter come in at $1.50 a share

Defense industry

April 22, 1999|By BLOOMBERG NEWS

LOS ANGELES -- Northrop Grumman Corp. reported yesterday that first-quarter earnings were little changed, topping analysts' forecasts, as the No. 5 U.S. defense contractor got a bigger-than-expected boost from investment income.

Profit from operations notched down to $104 million, or $1.50 a share, from $105 million, or $1.52, a year earlier. The results beat the $1.33 average estimate of analysts polled by First Call Corp. Sales rose 4.2 percent to $2.1 billion from $2.01 billion.

It was the second consecutive quarter of lower profit for Northrop. Chairman Kent Kresa has faced declining overseas sales and delays in some key weapons programs since the Pentagon blocked his plan to sell the Los Angeles-based company to Lockheed Martin Corp. last year. Northrop's stock has dropped 37 percent since then.

Kresa "must be feeling pressure to get some sort of catalyst," said Rich Rosenthal, an aerospace analyst with Kornitzer Capital Management, which held 14,600 Northrop shares at year's end. He predicted that Northrop will start merger discussions with another company, possibly overseas, or step up its pace of acquisitions to revitalize growth.

Northrop makes the B-2 bomber and supplies commercial airplane parts, radar and air-defense systems. Its shares closed yesterday at $64.8125, up 18.75 cents.

The company's pension income rose 28 percent to $83 million, accounting for 38 percent of the overall profit from operations, and was higher than many analysts had expected, according to Paul Nisbet of JSA Research Inc. Northrop forecast that full-year pension income will increase by $68 million, or 26 percent, over the $266 million recorded in 1998.

Northrop also got a boost from its information-technology business, Logicon, where sales rose 53 percent to a record $359 million in the quarter. The business won orders for computer services and other support functions from customers including the National Aeronautics and Space Administration and the Air Force. Logicon's profit from operations rose 36 percent to $19 million from $14 million in the year-earlier quarter.

The gains were overshadowed by weaker results in Northrop's two largest businesses, aircraft and its Linthicum, Md.-based Electronic Sensors and Systems Sector.

The aircraft division faces the winding-down of Northrop's contract for the B-2 as well as declining orders from Boeing. Profit from operations in the aircraft division fell to $82 million from $85 million.

In electronics, profit fell to $45 million from $58 million, which Northrop blamed in part on higher costs to start production of a new defense system.

The company took a first-quarter charge of $16 million, or 24 cents a share, for a change in the way it accounts for start-up costs. That led to net income of $88 million, or $1.26 a share.

Pub Date: 4/22/99

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