Defense contractors report lower sales, higher profits


WASHINGTON — Sales at defense giants General Dynamics and Northrop Grumman declined in the first quarter, while profits increased as both companies continued to trim costs.

Profits at General Dynamics increased 4.2 percent in the first quarter to $595 million or $1.74 per share, while revenue declined 1.1 percent compared with a year ago, the company reported Wednesday. Operating costs were down 1.6 percent compared with a year ago.

Revenues declined in three out of four of the company’s business segments, which includes combat, marine and information systems. Sales in the information systems segment declined by 1.6 percent. Increased orders for the company’s commercial Gulfstream jet bolstered the aerospace segment, which grew by nearly 20 percent in the first quarter.

The company renewed existing contracts with the Navy and the British military in the first quarter, and received a new $10 billion contract with the Canadian government’s commercial contracting agency.

Phebe Novakovic, the company’s chairman and chief executive, called Wednesday’s report a “solid start” to the year, but added that General Dynamics, based in Falls Church, Virginia, would focus on more cost-cutting measures in 2014.

Northrop Grumman, also based in Falls Church, reported an 18.4 percent increase in profits for the first quarter — helped by a $51 million tax benefit as the Internal Revenue Service concluded its examination of the contractor’s 2007-2009 tax returns, the company said. Profits were up to $579 million, or $2.63 per share, compared with $489 million, or $2.03 per share, last year. Operating margins were up to 14.4 percent, from 12.4 percent a year ago. Northrop Grumman also repurchased 4.8 million shares of its common stock for $564 million in the first quarter.

Sales were down 4.9 percent in the first quarter to $5.8 billion compared with a year ago.

, and they decreased across the company’s segments. The information systems and technical services segments saw sales drop by 5.8 percent and 2.8 percent respectively.

The company said it expects international business to ramp up in the next few years and make up for some of the decline in domestic contracts. Global customers made up 14 percent of the company’s backlog of contracts in the first quarter, Wes Bush, the company’s chief executive, said in a conference call with investors.

When asked about Washington’s budget plans and the threat of further sequestration in 2016, Bush said it was too early to estimate what effect they would have on the company’s future.

“While the U.S. budget continues to be challenging, we have potential long-term opportunities,” he said.

General Dynamics’ share price jumped 3.3 percent after the morning report and Northrop Grumman’s rose 1.6 percent.

On Tuesday, Lockheed Martin reported that its first-quarter sales fell by 3.6 percent compared with a year ago, while profits were up by more than 23 percent.

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