Two U.S. defense companies beat estimates
By Andrea Shalal-Esa
General Dynamics Corp (GD.N: Quote), the other big U.S. defense company to report results on Wednesday, had a 9 percent drop in first-quarter earnings, and cited budget anxiety that was slowing government contract awards and a $67 million charge from its European combat systems operations.
The companies warned in calls with industry analysts that their outlooks could dim if U.S. lawmakers do not take action to avoid an additional $500 billion in across-the-board defense spending cuts that are due to take effect in January under a process known as "sequestration." Those cuts would come on top of $487 billion in defense cuts already being implemented for the next decade.
Northrop Chief Executive Wes Bush said sequestration represented an "ugly cloud" that would have a devastating effect on the industry and was forcing defense companies and the Pentagon to map out contingency plans. But he said there was too much uncertainty to give any specifics at this point.
Given the difficult budget environment, Northrop and the other firms stressed that they were keenly focused on improving their performance and cutting costs wherever possible.
Backlogs were strong across all three companies, but General Dynamics and Northrop reported lower revenue. Margins remained strong at all three companies.
Northrop reported a 2 percent increase in profits from continuing operations in the first quarter, citing cost-cutting across the company.
Northrop's net earnings fell 4.5 percent, reflecting a $34 million gain in the year-ago period from discontinued operations from Northrop's spinoff of shipbuilder Huntington Ingalls Industries Inc. Continued...