By Utkarsh Shetti and Mike Stone
(Reuters) -U.S. defense company Northrop Grumman beat estimates for quarterly profit on Thursday, as headwinds from its B-21 Raider stealth bomber program eased and rising geopolitical tensions stoked demand for its military equipment.
The ongoing conflicts in the Middle East and the Russia-Ukraine war have increased demand for arms across the world and has benefited U.S. defense contractors.
However, a rise in costs owing to a slower recovery in pandemic-related supply chain snags have dented margins for companies in the sector.
Northrop expects sales in 2025 to be between $42 billion and $42.5 billion, slightly short of analysts’ average estimate of $42.8 billion, according to data compiled by LSEG.
Shares of the company fell about 1.7% in morning trading.
It expects an adjusted per-share profit of between $27.85 and $28.25 for the year, the midpoint of which is in line with expectations.
Military equipment demand is expected to remain strong as there is likely to be increased defense spending under U.S. President Donald Trump, but investor sentiment has been clouded by potential budget cuts under the newly formed Department of Government Efficiency headed by billionaire Elon Musk.
In 2024, U.S. military equipment sales to foreign governments surged 29% to a record $318.7 billion, underpinning expectations of stronger sales for weapons makers such as Northrop.
CEO Kathy Warden said on a post-earnings call that international sales in 2025 are expected to grow at a double-digit rate — which would be at a faster pace than the U.S. sales.
The company also said it has signed an agreement to sell its training services business for $327 million.
Northrop posted fourth-quarter sales of $10.69 billion, missing expectations of $11.01 billion.
Its adjusted per-share profit for the quarter ended Dec. 31 was $6.39, surpassing estimates of $6.35.
(Reporting by Utkarsh Shetti in Bengaluru and Mike Stone in Washington; Editing by Krishna Chandra Eluri and Shilpi Majumdar)
