Northrop Grumman net up 37 pct, sees 2007 in line

Thursday, January 25, 2007; 9:04 AM

NEW YORK (Reuters) - Northrop Grumman Corp. <NOC.N said on Thursday fourth-quarter profit rose 37 percent, slightly below expectations, as better margins in its information, electronics and shipbuilding units were partly offset by a charge on a radar program.

The No. 3 U.S. defense contractor, which makes warships, nuclear submarines, unmanned surveillance planes and a range of military electronics, also raised its 2007 profit forecast, in line with Wall Street expectations, partly due to a pension-related gain.

The Los Angeles-based company reported net profit of $453 million, or $1.28 per share, compared with $331 million, or 92 cents per share, in the year-ago quarter.

Earnings from continuing operations were $1.29 per share. On that basis, Wall Street was expecting $1.31 per share, according to Reuters Estimates.

Revenue rose 5 percent to $8 billion. Analysts had forecast $8.1 billion.

Profit was hit by a $61 million pretax loss provision for its Multi-role Electronically Scanned Array (MESA) radar system, which is a fixed-price development program, meaning that Northrop must cover the costs of unplanned delays itself. Federal and foreign income taxes also rose sharply, dragging back profit.

Northrop, like rivals Lockheed Martin Corp. <LMT.N>, Boeing Co. <BA.N> and General Dynamics Corp. <GD.N>, is benefiting from high spending on military operations in Iraq and Afghanistan and the increase of outsourcing of government technology systems.

Northrop's shares hit an all-time high of $71.82 earlier this week and are up about 19 percent over the past 12 months. The Standard & Poor's Aerospace and Defense index <.GSPAERO> jumped 29 percent in that time, outperforming most other sectors. The S&P 500 Index <.SPX> is up about 14 percent over the past 12 months.

Looking forward, Northrop forecast full-year 2007 earnings from continuing operations of $4.80 to $5.05 per share, up from its October forecast of $4.65 to $4.90 per share, helped by an expected gain from the company's pension plans based on a change in investment assumptions. Wall Street is expecting $4.86 per share, on average.

It kept its forecast for 2007 sales unchanged at $31 billion to $32 billion. Analysts are expecting $31.96 billion, on average.

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