July 25, 2012
Credit: Credit: USAF
Weapons maker Northrop Grumman Chief Executive Wes Bush on Wednesday said an additional $500 billion in across-the-board defense budget cuts would result in lower earnings, sales and cash flow for the company.
Bush said the company had not received any detailed guidance from the Pentagon on how to plan for the budget cuts, which are due to take effect on Jan. 2, under a process known as “sequestration,” but was already developing contingency plans.
The cuts would come on top of $487 billion in U.S. defense cuts already slated to take effect over the next decade.
He said sequestration and other budget scenarios all called for a heightened focus on innovation, cost reductions and customer affordability initiatives, actions the company had already taken to improve its performance for shareholders and customers, reducing costs, and tweaking its portfolio.
Bush said he felt confident that unmanned systems, cybersecurity, intelligence and logistics would remain key priorities for the U.S. government, regardless of what happened, and those were areas in which he said Northrop was well-positioned.
Northrop reported higher-than-expected quarterly earnings on Wednesday and raised its forecast for the full year, citing a spate of new orders and strong cash generation.
Northrop, which builds Global Hawk unmanned surveillance planes, radars and electronic systems, said second-quarter profit fell to $480 million from $520 million a year earlier. Earnings per share rose to $1.88 from $1.81 because of a reduction in outstanding stock.
Analysts polled by Thomson Reuters I/B/E/S had expected far lower earnings per share of $1.61.