Earnings at Northrop Grumman, one of two defense contractors on the next-generation U.S. intercontinental ballistic missile, rose nearly 25 percent in the second quarter, the company reported this week.
Quarterly net income increased 24 percent to $689 million, or $3.93 a share, from $555 million, or $3.16 a share, beating the Street by $0.09 per share. Sales rose 10 percent to $7.1 billion from $6.5 billion a year ago, mostly because the company’s June acquisition of Dulles, Va.-based Orbital ATK added $400 million to the top line. Backlog at the end of the quarter increased to $52.2 billion from $42.9 billion at the end of 2017.
Northrop Grumman and Boeing are working on competing designs for new intercontinental ballistic missile systems under the Pentagon’s Ground-Based Strategic Deterrent (GBSD) program. The companies’ three-year contracts are worth about $330 million and $350 million, respectively. The GBSD will replace legacy Minuteman III missiles, which are mostly armed with W78 nuclear warheads designed at the Department of Energy’s Los Alamos National Laboratory.
The Pentagon intends to select either the Northrop or Boeing design for GBSD early in the next decade before deploying the next-generation missiles in the late 2020s. The new missiles could use either a refurbished W78 or the first of three planned interoperable warheads.
In Northrop’s Aerospace Systems segment, which handles the GBSD work, second-quarter operating profit rose about 10 percent to more than $355 million, while sales increased about 10 percent to some $3.3 billion. That included “higher restricted and GBSD volume,” the company stated in its latest 10-Q filing with the U.S. Securities and Exchange Commission.
Through the Orbital ATK acquisition, Northrop now has a stake in Consolidated Nuclear Security: prime contractor managing the Y-12 National Security Complex in Oak Ridge, Tenn., and the Pantex Plant in Amarillo, Texas, for the Department of Energy’s National Nuclear Security Administration. These are the two main weapons production facilities in the complex, respectively processing uranium and servicing active nuclear weapons.
Northrop’s earnings call this week was the first since Chief Executive Wes Bush’s surprise retirement announcement. Earlier this month, Bush said he would step down as chief executive officer as of Jan. 1, 2019, to be replaced by Kathy Warden: Northrop’s president and chief operating officer. Bush will remain chairman of Northrop’s board through July 2019.
