Charge Weighs on Northrop Grumman

Earnings rise just 5%, while revenue comes up short.
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Northrop Grumman

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posted a 5% rise in third-quarter income from continuing operations, as results were hurt by a big charge related to a settlement with the Department of Justice.

The defense contractor also pared its full-year guidance in part to reflect the charge.

Northrop Grumman said Tuesday that its earnings from continuing operations rose to $306 million, or 87 cents a share, from $291 million, or 81 cents a share, a year earlier. The results included a charge of $112.5 million, or 20 cents a share, related to Justice Department claims about certain parts produced by TRW, a company Northrop Grumman acquired.

Analysts, who typically exclude charges from their forecasts, predicted earnings of $1.07 a share, according to Thomson First Call.

Northrop's total revenue rose to $7.43 billion from $7.29 billion, coming in short of Wall Street's forecast of $7.73 billion. The company saw sales declines in two of its biggest divisions: mission systems and aerospace.

Contract acquisitions for the quarter jumped 25% to $6.3 billion, with all four of the company's businesses ending the period with higher funded backlogs. Total backlog increased 7% to $59.8 billion.

For 2006, Northrop cut its sales forecast to $30.2 billion from an earlier view of $30.5 billion. The company now sees earnings of $4.20 to $4.25 a share instead of its prior guidance of $4.35 to $4.45. The company said the lower earnings forecast reflects the 20-cent charge.

Analysts, on average, project 2006 earnings of $4.48 a share on $30.52 billion in revenue.

Looking ahead, Northrop predicted 2007 earnings of $4.65 to $4.90 a share on sales of $31 billion to $32 billion. Wall Street is targeting earnings of $4.86 a share and sales of $32.37 billion.