Northrop Grumman Raises Outlook as Profit Beats Estimates

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The maker of Global Hawk drones, the fifth-largest defense contractor, is battling a pullback in military spending as it vies for a new bomber contract to be awarded this year.

The maker of Global Hawk drones, the fifth-largest defense contractor, is battling a pullback in military spending as it vies for a new bomber contract to be awarded this year.

Photographer: Simon Dawson/Bloomberg

Northrop Grumman Corp. raised its 2015 outlook as the nation’s fifth-largest defense contractor predicted no interruption in U.S. funding for crucial military programs.

Earnings will be $9.40 to $9.60 a share, above the previous forecast of $9.20 to $9.50, the Falls Church, Virginia-based company said Wednesday in a statement. The average analyst estimate for full-year earnings is $9.48. The move comes after Raytheon Co. and Lockheed Martin Corp. lifted their forecasts last week.

Northrop said it boosted its outlook based on current federal spending plans and the assumption that debt-ceiling talks won’t lead to a government shutdown. The company said it assumes “no disruption or cancellation of any of our significant programs,” and continued funding into the first quarter of fiscal 2016.

The shares rose 0.9 percent to $162.01 at 8:42 a.m. in New York. The stock gained 8.9 percent this year through Tuesday, compared with a 2.7 percent advance in the Standard & Poor’s 500 Index.

The maker of the B-2 stealth bomber is competing for a new manned strike aircraft to be awarded in 2015 after years of spending pullbacks. The potential $55 billion U.S. Air Force deal would boost Northrop’s aerospace business, which has become a main focus since the company spun off its shipbuilding operations in 2011.

Net income fell 16 percent in the first quarter to $484 million, or $2.41 a share, Northrop said. Analysts had estimated $2.28 on average, according to data compiled by Bloomberg. Adjusted for the effects of pension changes, Northrop’s earnings were $2.14 a share.

Sales Rise

Sales rose 1.9 percent in the first three months of 2015 to $5.96 billion, breaking six straight quarters of declining revenue. The total was above analysts’ average estimate of $5.77 billion.

The aerospace unit boosted sales 3 percent to $2.5 billion, which Northrop said was due in part to increased volume in its unmanned and space programs.

Northrop said in January that it signed an Air Force contract worth about $963 million in support of the Minuteman III intercontinental ballistic missile program. The company also won cybersecurity awards in the U.S. and U.K. amid growing demand for protection against electronic threats.

Northrop is competing against a team from Lockheed Martin and Boeing Co. for the Long Range Strike Bomber, a program that could call for as many as 100 aircraft at a cost of $550 million apiece. The contract, set to be decided in the coming months, could anchor Northrop’s aerospace business as the military moves on from the B-2.

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