Tags: Northrop | NOC | defense | stocks

Northrop Grumman Trims Fat, Packs Profits

By    |   Thursday, 28 Jul 2011 03:47 PM

Aerospace and defense giant Northrop Grumman (NOC) is advancing on multiple fronts. The company is drumming up business where its products are needed and ditching those that just aren't falling in line with expectations.

Northrop’s first quarter revenue fell slightly to $6.7 billion from $6.9 billion in same period in 2010 due in part to a recent decision to cut its stake in the Nevada National Security Site, a military testing joint venture.

Profits, however, are up. First quarter earnings from continuing operations increased 21 percent to $496 million. Net income rose 13 percent to $530 million, with diluted earnings per share climbing to $1.79 from $1.53 during the first quarter of 2010.

The company spun off its shipbuilder Huntington Ingalls Industries, which resulted in a $1.43 billion cash contribution.

The shipbuilder is still reeling from the effects of Hurricane Katrina, which hammered the Gulf Coast in 2005, and it was not a good fit with Northrop Grumman's overall strategies anyway, according to the ratings agency Standard and Poor's.

The divestment makes Northrop Grumman smaller but hopefully more profitable as time goes on. "This was a very productive quarter. We completed the shipbuilding spin-off and our newly aligned portfolio generated solid financial results," says Northrop Grumman President and CEO Wes Bush.

In fact, Northrop Grumman raised its full-year guidance for earnings from continuing operations to $6.50 to $6.70 per share from earlier guidance of $6.40 to $6.60 per share.

Best defense

Analysts were happy with the company's decision to rid itself of its shipbuilding unit. "We believe continued high U.S. defense spending, steady operating performance, and disciplined use of sizable cash resources should sustain current credit quality," Standard & Poor's analyst Christopher DeNicolo writes in a recent research note on the company.

Standard & Poor's has assigned Northrop Grumman a BBB+ corporate credit rating and a stable outlook.

Things could get even better. "We could raise the ratings if Northrop Grumman demonstrates meaningful improvements in its financial results, a more-conservative financial policy, and a commitment to higher ratings," DeNicolo adds.

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Aerospace and defense giant Northrop Grumman (NOC) is advancing on multiple fronts. The company is drumming up business where its products are needed and ditching those that just aren't falling in line with expectations. Northrop s first quarter revenue fell slightly to...
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2011-47-28
Thursday, 28 Jul 2011 03:47 PM
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