Northrop Grumman Raises '05 Outlook, Dividend
{{#rendered}} {{/rendered}}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.
{{#rendered}} {{/rendered}}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.
{{#rendered}} {{/rendered}}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).
{{#rendered}} {{/rendered}}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.
{{#rendered}} {{/rendered}}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.