Military demand for surveillance and warship equipment boosted second-quarter profit for No. 3 U.S. defense contractor Northrop Grumman Corp. (NOC) by 44 percent, while Raytheon Co. (RTN) booked a loss after charges but still beat Wall Street's forecast.

Despite a better-than-expected quarter and a bullish outlook, shares of Northrop slipped as investors questioned a $60 million charge for an F-16 avionics program. Shares of Raytheon, the No. 5 Pentagon supplier, jumped 2.5 percent.

Northrop, a Los Angeles-based builder of warships and compared with $205 million, or 54 cents per share, a year ago. The company also raised its range of earnings and sales forecasts.

Income from continuing operations was $289 million, or 79 cents per share, compared with $207 million, or 55 cents per share, for the same period of 2003. Higher sales and a lower tax rate helped boost results, the company said.

On that basis, earnings beat the 74-cent-per-share average forecast of analysts surveyed by Reuters Research.

Still, shares of Northrop were down 80 cents, or 1.5 percent, to $52.90 in afternoon trade as some fretted about prospects for Northrop's F-16 fighter jet's (search) block 60 combat avionics program, after the company took a $60 million charge for higher project costs.

"Is it really under control?" said Eric Hugel, an analyst for investment firm Stephens Inc.

Still, he said, the quarterly results "are positive overall."

Northrop raised its 2004 sales forecast to about $29 billion, and said it expected earnings of $2.90 to $3.00 per share. The company also said it expected cash from operations to be about $1.7 billion.

Earlier, Northrop had said it was looking for earnings of $2.80 to $2.95 per share, on revenues of about $28 billion.

Analysts were expecting earnings of $2.95 per share, on revenues of $28.80 billion.

All five business units posted higher revenues, led by the mission systems group, which oversees command, control and intelligence, as well as missile systems.

Raytheon posted a second-quarter loss after charges for early retirement of debt and a lawsuit settlement, but results beat Wall Street forecasts when the charges were excluded and sales rose 11 percent. Shares climbed more than 2.7 percent. The stock climbed 81 cents, or 2.5 percent, to $33.52.

The Waltham, Mass., maker of military electronics, missile systems and business aircraft, said it lost $94 million, or 22 cents per diluted share, compared with profit of $186 million, or 45 cents per diluted share, in the second quarter of 2003.

Excluding charges, income from continuing operations was $152 million, or 35 cents per share. On that basis, the company beat analyst forecasts of 31 cents per share, according to Reuters Estimates.

Sales rose to $4.93 billion from $4.43 billion a year earlier, compared with analysts' average forecast of $4.86 billion.

The company told investors it expects results for the full year of 2004 to come in at the high end of its expectations.

Raytheon expects full-year earnings from continuing operations between 79 cents and 89 cents a share, including the charges. Excluding those charges, it kept its earlier outlook for full-year earnings of $1.30 to $1.40 a share.

Raytheon's shares were up 83 cents or 2.54 percent at $33.54 Thursday on the New York Stock Exchange (search).