Northrop Grumman Raises '05 Outlook, Dividend

Defense contractor Northrop Grumman Corp. (NOC) on Thursday raised its yearly earnings outlook by nearly a quarter, sending its shares surging nearly 5 percent.

Northrop, the fourth-largest U.S. aerospace and defense company by market value, also said its board had approved a 13 percent increase in its quarterly dividend.

Northrop, a maker of radar equipment, missiles and warships, said in a statement that it expects to report earnings per share from continuing operations of $3.60 to $3.75 for 2005, up from a previous estimate of $3.45 to $3.60.

The Los Angeles-based company said it expects revenue of $31 billion to $31.5 billion in 2005, rising to about $33 billion in 2006.

Northrop shares were up $2.31, or 4.3 percent, to $55.06, outperforming the Amex Defense index (search), which was up 0.8 percent, trimming earlier gains of close to 5 percent.

"It's definitely quite bullish," said Paul Nisbet, an analyst at independent research firm JSA Research Inc.

He added that the 15 cent-a-share increase is after two nonrecurring items that together cut the company's earnings by 7 cents a share, so the increase should really be viewed as 22 cents.

"That puts them somewhere in the neighborhood of a 25 percent increase in earnings this year," he said.

Earnings per share from continuing operations in 2006 are seen growing at a "solid double-digit rate" on a percentage basis before the effect on 2005 earnings of a gain on a recent sale of common stock in TRW Automotive Holdings Corp. (TRW).

The revised 2005 forecast included the expected $45 million, or 12 cents a share, gain from the TRW sale, Northrop said.

Nisbet said the strong numbers were a sign that Northrop is focusing on its internal operations after a several-years-long shopping spree.

"It's pretty much done with the integration of all these businesses that they've acquired, and now they're tweaking the earnings," he said.

Northrop also said it was raising its dividend to 26 cents a share from a previous 23 cents a share. It declared a $1.75 per share dividend on its series B convertible preferred shares, payable to shareholders of record by the close of business July 1.