By Dow Jones Business News, October 23, 2013, 07:52:00 AM EDT
By Tess Stynes
Northrop Grumman Corp.'s ( NOC ) third-quarter earnings rose 8.3% as stronger operating margins and a lower tax rate
offset a modest decline in the defense contractor's revenue.
For the year, the company raised its per-share earnings estimate to $8 to $8.15 and sales of $24.4 billion, from its
previously increased estimate for a per-share profit of $7.60 to $7.80 and sales of $24.3 billion.
Defense-sector revenue remains under pressure from weaker defense spending, which has been compounded by further U.S.
government-spending cuts known as the sequester that went into force during March and concerns about any further cuts in
The fifth-largest U.S. military contractor by sales, which builds unmanned aircraft such as the Global Hawk and
provides cybersecurity and logistics services, has been streamlining operations for the past several years to cope with
leaner defense budgets.
Northrop Grumman in August agreed to buy the defense unit of Australian flag carrier Qantas in a deal that highlights
the drive for defense contractors to boost revenue and their international exposure at a time of declining global
Northrop Grumman reported a profit of $497 million, or $2.14 a share, up from $459 million, or $1.82 a share, a year
earlier. Excluding pension-adjustment impacts, adjusted earnings from continuing operations were up at $1.97 from $1.73.
Revenue decreased 2.6% to $6.1 billion as sales declined at three of its four business segments. Electronic systems,
where sales rose 4%, was the exception.
Analysts polled by Thomson Reuters recently expected per-share earnings of $1.82 and revenue of $5.96 billion.
Operating margin rose to 12.9% from 11.7%. The company's effective tax rate was 31%, compared with 34% a year earlier.
At quarter's end, Northrop Grumman's total backlog was $37.5 billion, compared with $41 billion reported a year
earlier and $37.72 billion at the end of the second quarter.
The company said the decrease in backlog was mostly owing to tight U.S. budgets and information systems adjustments of
$1 billion to reduce unfunded backlog for expired periods of performance on active contracts.
Shares were up 54 cents$102 in light premarket trading. Through the close, the stock is up 50% this year.
Write to Tess Stynes at firstname.lastname@example.org
Corrections & Amplifications
This item was corrected at 9:46 a.m. EDT to show that the company's year-earlier effective tax rate was 34%. The
original incorrectly stated 43%.
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