WASHINGTON – Top weapons makers reported higher-than-expected profit and improved margins for the first quarter, even as revenue began to taper off after more than a decade of sharp growth in U.S. military spending.
Boeing Co's defense division, Northrop Grumman Corp and General Dynamics Corp on Wednesday followed the lead of top Pentagon supplier Lockheed Martin Corp in reporting higher earnings and lower revenue.
Operating margins remained steady or improved across the sector, ranging from 10.3 percent to 12.4 percent.
"Weaker revenues and strong earnings are typical of this point in the defense spending cycle. However, the erosion in revenues is probably a leading indicator of where earnings are headed," said defense analyst Loren Thompson of the Virginia-based Lexington Institute.
"Earnings eventually will erode as the impact of sequestration is fully felt," he said, referring to across-the-board federal spending cuts.
Northrop Grumman, which builds unmanned planes and a range of other defense equipment, said it was focused on executing programs, cash deployment and tweaking its portfolio as U.S. defense budgets start to feel the bite of the mandatory spending cuts.
The company reported net earnings of $489 million, or $2.03 a share, compared with $506 million, or $1.96 a share a year earlier. Revenue dipped to $6.1 billion from $6.2 billion.
"Looking ahead, we recognize that we are operating in an uncertain and constrained budget environment," said Northrop Chief Executive Wes Bush.
General Dynamics, which builds ships, tanks and Gulfstream business jets, reported slightly higher first-quarter earnings, far exceeding analysts' forecasts, but revenue fell short of expectations.
General Dynamics said net earnings rose to $571 million, or $1.62 per share, from $564 million or $1.57 per share, a year earlier. Revenues dipped to $7.4 billion from $7.58 billion.
Boeing, the second-largest U.S. weapons maker, said its defense earnings rose 12 percent to $832 million, while revenue slipped 1 percent to $8.1 billion.
Boeing's operating margin remained the lowest in the sector, although it rose to 10.3 percent from 9 percent a year earlier.
(Reporting By Andrea Shalal-Esa; editing by John Wallace)