Northrop Grumman Sees Capacity for More Contracts
28 Octobre 2015 - 9:22PM
Dow Jones News
By Doug Cameron
Northrop Grumman Corp. has the capacity to bid on other big
upcoming Pentagon contract awards even after securing a huge deal
to build a fleet of new bombers, Chief Executive Wes Bush said
Wednesday.
Mr. Bush, speaking after Northrop reported a 9% rise in
third-quarter profit, also said that the world's fifth-largest
defense contractor by sales doesn't plan to follow some rivals and
carve out its services business, with a recent restructuring aimed
at speeding product development and reducing costs rather than
repositioning the company's portfolio.
Northrop Grumman shares climbed sharply in the wake of the
Pentagon's announcement late Wednesday that the company had
defeated a team of Boeing Co. and Lockheed Martin Corp. to build as
many as 100 long-range bombers. Analysts value the program at as
much as $80 billion, which would make it likely the largest defense
contract for at least a decade.
"We have the resources in place [and] we are ready to get to
work," Mr. Bush said on a conference call Wednesday after Northrop
reported its quarterly results, which beat expectations, and
boosted its full-year sales and earnings guidance. He declined to
comment further on the bomber award, citing its classified
nature.
The losing companies are widely expected by analysts to protest
the decision and could be briefed by the U.S. Air Force as early as
Friday, triggering a 10-day window for them to lodge concerns with
the Government Accountability Office.
Analysts estimated the bomber deal could add $1 billion or more
to Northrop's annual revenue--which reached $24 billion last year--
if it successfully navigates any protest. The planes would be
produced at its classified facility in Palmdale, Calif.
Mr. Bush said the shift of big programs such as the F-35 fighter
to production from development has freed up resources to bid on
other big programs. Lockheed is the main contractor on the F-35,
but Northrop makes part of the fuselage, sensors and communications
equipment for the jets.
"We do have significant capacity," said Mr. Bush. He cited the
Navy's plans for a new drone and efforts by the Air Force to
replace its fleet of aging trainers and surveillance planes as
three programs Northrop could still pursue.
Northrop built a test drone for the Navy's Uclass program, but
lawmakers and military chiefs are still working on requirements for
that project.
The company is teamed with the Gulfstream arm of General
Dynamics Corp., L-3 Communications Holdings Inc. and others in
pursuit of the contract for a new communications plane known as
Jstars, where it faces competition from Lockheed and Boeing. The
same trio that fought out the bomber contest is also expected to
bid on a contract to build hundreds of new trainer jets.
Mr. Bush also said on Wednesday that he has no plans to step
down, following the company's recent decision to revive the role of
chief operating officer, which some analysts viewed as succession
planning.
Defense stocks were broadly ahead of the wider market Wednesday
in the wake of upbeat earnings, a potential Pentagon budget deal
and the bomber award, with only Boeing and Lockheed and Boeing
losing ground.
Northrop shares were recently up 5.5% at $190.53 in heavy
trading, off its session high as it opted to avoid setting a new
benchmark for share buybacks after reaching its target of
repurchasing a quarter of its outstanding stock over the past three
years.
General Dynamics also beat expectations on Wednesday, reporting
a 5% rise in third-quarter profit, with its stock gaining 0.85%.
L-3, which reports Thursday, gained almost 10% after hiring former
Lockheed COO Chris Kubasik to fill the same role. Booz Allen
Hamilton Holding Corp., the largest defense services provider,
gained 8.5% after forecast-beating quarterly profits.
Write to Ezequiel Minaya at ezequiel.minaya@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 28, 2015 16:07 ET (20:07 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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