Northrop pegs full-year sales, earnings at lower end of guidance

By Mike Stone and Nathan Gomes

(Reuters) – U.S. defense contractor Northrop Grumman Corp on Thursday said it expected full-year sales and profit to be near the lower end of its forecast amid lingering supply chain snags and higher costs that have weighed on earnings throughout the industry.

The company’s shares were flat versus Wednesday at $531.97 during mid-day trading in New York after dipping to $505 before the opening bell. Northrop estimated 4% to 5% revenue growth in 2023.

Northrop had forecast 2022 sales in the range of $36.2 billion to $36.6 billion, and a profit per share between $24.50 and $25.10.

Defense companies, still reeling from higher costs and labor shortages, continue to experience supply chain constraints that have impacted production by them and their suppliers.

On a post-earnings conference call with investors, Chief Executive Kathy Warden said that “inflation remains at 40-year high, lead times have been extended in certain areas of our supply chain, and the labor market shows signs of easing, but it remains tight for critical skills.”

Northrop, is now seeing improving trends in labor availability after struggling with COVID-19 pandemic-related labor challenges.

“Labor availability is gradually improving as 2022 has progressed,” Chief Financial Officer Dave Keffer told Reuters in an interview, praising his human resources team.

There was “a lot of day-to-day blocking and tackling across a business of our size to have 2,700 net hires” in the quarter, Keffer said.

Revenue at its Aeronautics Systems unit, which manufactures military aircraft such as the B-21 Raider, fell about 7% to $2.54 billion in the third quarter ended Sept. 30 due to lower sales of planes and autonomous aircraft systems.

Overall revenue rose 3% in the quarter to $8.97 billion, but missed analysts’ average expectation of $9.13 billion, as per Refinitiv data.

Sales at the Space Systems division, aided by higher demand for space exploration, rose about 18% to $3.16 billion, helping the Falls Church, Virginia-based company offset lower sales at the aeronautics and defense units.

Northrop reported a 14% fall in quarterly adjusted net earnings to $915 million, or $5.89 per share, below expectations of $6.11 per share. Its year-to-date book-to-bill, which is a ratio of orders received to units shipped and billed, was 1.14.

(Reporting by Mike Stone in Washington, D.C., Nathan Gomes in Bengaluru; editing by Milla Nissi, Will Dunham and Jason Neely)