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Northrop Grumman (NOC) Q4 Earnings Top Street View

 January 30, 2013 08:12 AM

(By Mani) Northrop Grumman Corp. (NYSE: NOC) reported better-than-expected earnings for its fourth quarter on higher sales from Aerospace segment. However, the defense contractor guided its full-year revenue below consensus, while seeing earnings in line with Street view.

The company reported net earnings of $533 million, or $2.14 a share, compared to $548 million, or $2.09 a share, in the same quarter last year. Excluding pension-adjustments, earnings per share from continuing operations increased 11 percent to $2.06 from $1.85. Wall Street expected earnings of $1.74 a share, according to analysts polled by Thomson Reuters.

Quarterly sales declined to $6.48 billion from $6.51 billion in the year-ago quarter. Analysts estimated sales of $6.33 billion.

Aerospace Systems fourth quarter 2012 sales increased 7 percent due to higher volume for unmanned systems, including NATO AGS and Fire Scout, and higher volume for the F-35 and Advanced Extremely High Frequency satellite (AEHF) programs.

As of Dec. 31, 2012, total backlog increased 3 percent to $40.8 billion compared with total backlog of $39.5 billion as of Dec. 31, 2011. Total backlog as of Dec. 31, 2012, includes new business awards of $26.5 billion in 2012.

Through Dec. 31, 2012, cash provided by continuing operations increased to $2.6 billion from $2.3 billion in the prior year. The increase is principally due to lower discretionary pension pre-funding in 2012.

Free cash flow from continuing operations through Dec. 31, 2012, rose to $2.3 billion from $1.9 billion in the prior year due to higher cash provided by operating activities and lower capital expenditures in 2012.

Before discretionary pension contributions, cash provided by continuing operations totaled $2.8 billion in 2012 compared with $3.0 billion in 2011, and 2012 free cash flow before discretionary pension contributions of $2.5 billion was unchanged from the prior year.

For 2013, Northrop sees earnings from continuing operations of $6.85 to $7.15 a share on sales of about $24 billion. Street expects earnings of $6.99 a share on revenue of $24.36 billion.

Northrop is facing heavy spending cuts, or sequestration, in the upcoming budget on military spending. The entire defense industry is reeling under the uncertainties of the federal budget, and some of its peers like Lockheed Martin Corp. (NYSE: LMT) and Boeing Co. (NYSE: BA) have been laying off workers anticipating a sequestration. If sequestration occurs, it would result in further job loss. Northrop could take similar actions to cut costs.

"As we look ahead, we expect challenges, but we are confident in our team's ability to address those challenges and continue to create value for all our stakeholders," said Wes Bush, chairman, chief executive officer and president.



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