Northrop Grumman Raises 2024 Profit Forecast Amid Global Defense Spending

By Pratyush Thakur, Mike Stone

(Reuters) – U.S. defense company Northrop Grumman (NYSE:NOC) has raised its 2024 profit forecast for the second time, citing increased global defense spending driven by conflicts in the Middle East and the ongoing Russia-Ukraine war.

The company's shares rose by 1% in pre-market trading. Geopolitical tensions have positively impacted arms manufacturers, including Lockheed Martin (NYSE:LMT) and RTX, both of which have also boosted their 2024 earnings forecasts.

Northrop now anticipates an adjusted profit per share between $25.65 and $26.05 for the full year, revising its previous estimate of $24.90 to $25.30.

However, the company maintains its annual sales forecast unchanged, with projections up to $41.4 billion.

Looking ahead to 2025, Northrop expects margin dollars to grow at a faster pace than sales and has forecasted a reduction of about $1.5 billion in capital expenditures.

"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," said Northrop CEO Kathy Warden.

Like many defense firms, Northrop has encountered challenges on some fixed-price contracts due to inflation, strained supply chains, and labor shortages. Competitor Boeing (NYSE:BA) has faced billions in losses on similar contracts for the Pentagon.

Northrop is involved in complex defense programs, including the nuclear-capable B-21 Raider, a long-range stealth bomber, and the replacement for the U.S. nuclear arsenal anchored by the Minuteman III intercontinental ballistic missile network, known as Sentinel.

The company reported earnings per share of $7 for the third quarter ending September 30, surpassing the average analyst estimate of $6.07. Sales increased by 2% to approximately $10 billion.