Northrop Grumman Corp. (NOC), the maker of Global Hawk drones, topped analysts’ profit estimates in the second quarter and boosted its full-year forecast.
Net income rose 4.7 percent to $511 million, or $2.37 a share, in the quarter, from $488 million, or $2.05, a year earlier, the company said today in a statement. The average estimate of 20 analysts surveyed by Bloomberg was $2.22 a share.
Northrop, the fifth-largest U.S. government contractor, raised its full-year per-share profit forecast to a range of $9.15 to $9.35 from $8.90 to $9.15 in April. It also affirmed its January sales estimate for the year of $23.5 billion to $23.8 billion.
The company’s full-year outlook assumes no disruption to any of its major programs and adequate government funding in the final three months of the year.
Wes Bush, Northrop’s chairman and chief executive officer, said he was “cautious” about future U.S. government spending. He told investors during a conference call today that it’s “increasingly clear” that Congress will fund the government after Sept. 30 through a stop-gap spending measure rather than a regular spending bill.
Bush also warned that automatic budget cuts under a process known as sequestration might return in October 2016.
Sales declined 4.1 percent to $6.04 billion in the quarter. That beat the $5.96 billion average estimate of 17 analysts surveyed by Bloomberg.
The company reported a 4.2 percent decline in its aerospace systems segment, including reduced demand for the Global Hawk. Declines were also reported for electronic systems and information systems. The technical services unit had a 1.4 percent increase, reflecting higher international sales.
Northrop repurchased 6.1 million shares for $741 million in the quarter.
Defense contractors’ sales have been falling as the government slows spending and winds down the war in Afghanistan. Federal budget cuts last year contributed to the fourth consecutive annual decline in government contracting, the longest stretch since Ronald Reagan was president.
Some of Northrop’s programs benefited in President Barack Obama’s budget request for the year beginning Oct. 1.
Obama proposed keeping the Global Hawk drones and phasing out the U-2 spy plane. That reversed a previous Pentagon plan to cut spending by grounding the Global Hawk Block 30 in favor of Lockheed Martin Corp. (LMT)’s U-2.
Northrop, based in Falls Church, Virginia, in June won 34 percent of the $40.9 billion in contracts announced by the Pentagon, including an award with a maximum value of $9.9 billion for maintenance on the B-2 stealth bomber.
Lockheed, the largest U.S. government contractor, yesterday reported sales and profit that beat analysts’ estimates for the second-quarter. The company, based in Maryland, also lifted its full-year profit forecast.
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