By Pratyush Thakur and Mike Stone
(Reuters) -U.S. defense company Northrop Grumman on Thursday raised its 2024 profit forecast for the second time amid increased global defense spending prompted by conflicts in the Middle East and the protracted Russia-Ukraine war.
Geopolitical tensions have benefited arms manufacturers such as Lockheed Martin and RTX, both of which also raised their 2024 earnings forecasts.
Northrop now expects adjusted profit per share between $25.65 and $26.05 for the full year, compared with its previous forecast of $24.90 to $25.30 per share.
The company kept its annual sales forecast unchanged, projecting it to reach up to $41.4 billion.
Northrop has been facing cost challenges on some of its fixed-price contracts due to inflation, strained supply chains, and labor shortages.
The B-21 Raider program incurred losses on initial production contracts and the Northrop-managed Sentinel program, aimed at replacing the aging intercontinental ballistic missile system, had significantly exceeded its initial budget estimate.
For 2025, Northrop said that it expects margin dollars to grow at a faster pace than sales, and forecast a roughly $1.5 billion reduction in capital expenditure on Thursday.
“Sales remain on target for 5% growth this year and the deliberate actions we are taking to improve margin rates have resulted in further expansion this quarter,” Northrop CEO Kathy Warden said.
The company posted earnings per share of $7 for the third quarter ended Sept. 30, beating the average analyst estimate of $6.07, according to data compiled by LSEG. Sales rose 2% to around $10 billion.
The company’s shares were up 1.3% before the bell.
(Reporting by Pratyush Thakur in Bengaluru; Editing by Shailesh Kuber and Shounak Dasgupta)
