Northrop Grumman Soars Past Expectations as Net Income Jumps 66%

The company attributed the increase in earnings to improved operating margins, which rose 45%.
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Shares of Northrop Grumman (NOC) - Get Report surged in Monday morning trading after the nation's fifth-largest defense contractor reported first-quarter earnings growth that greatly exceeded Wall Street's expectations.

Los Angeles, Calif.-based Northrop Grumman said net income rose 66% to $173 million, or $2.47 a share, in the quarter, compared with $104 million, or $1.50 a share, in the year-ago quarter, not including an accounting charge. Revenue fell 0.6% to $2.08 billion.

Analysts had been expecting Northrop Grumman to report earnings of $1.86 a share, according to a poll conducted by

First Call/Thomson Financial

.

The company also said it expected full year 2000 earnings of between $9.30 and $9.60 a share, sharply higher than the analyst estimate of $7.78 a share, based on a First Call/Thomson Financial poll.

Shares of Northrop Grumman rose 1 1/2, or 2%, to 68 1/2 in morning trading. The company's stock price has been steadily climbing back from a 52-week low of 42 5/8 in March. (Northrop Grumman closed up 3 7/16, or 5%, at 70 7/16.)

The company attributed the increase in first-quarter earnings to improved operating margins. Northrop Grumman said operating margins for the first quarter rose 45% to $314 million, compared with $216 million in the same period a year ago. The improvement was prominent in Northrop Grumman's largest business,

Integrated Systems and Aerostructures

, and

Logicon

, its information technology unit.

The Integrated Systems and Aerostructures unit reported a 3% decline in sales to $1.1 billion for the quarter while operating margins jumped 43% to $117 million. Logicon recorded a 7% increase in sales to $378 million while operating margins rose 63% to $31 million.

Kent Kresa, Northrop Grumman's chairman, president and chief executive, said in a statement that the company would continue to concentrate on businesses where it saw the greatest growth potential.

"We are continuing to strategically redefine Northrop Grumman and are pursuing a plan that focuses on our high-growth business areas of defense electronics, systems integration and information technology," Kresa said.

Northrop Grumman's order backlog fell to $9.9 billion as of March 31, 2000, compared with $10.7 billion a year ago, primarily from the winding down of its B-2 stealth bomber program, the company said.