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U.S. MAJORS REPORTING SEASON

U.S. MAJORS WEATHER DOWNTURN IN REPORTING SEASON

23 Oct 13. The FT reported that Northrop Grumman boosted profit margins far more than expected amid US defence cuts as it announced an 8 per cent rise in third-quarter net earnings to $497m, despite declining demand for products including its Global Hawk drones. The company, which is a significant contributor to the F35 fighter, also increased its forecast for full-year earnings per share by around 5 per cent. The projection, which had been for a range of $7.60 to $7.80, was increased to $8.00 to $8.15. Northrop’s move came as General Dynamics, another significant Pentagon supplier, announced its third-quarter earnings were 8.5 per cent up on last year, at $651m, despite a 1.7 per cent decline in sales to $7.8bn. On Tuesday, Lockheed Martin, the world’s biggest military contractor by sales, increased its full-year earnings forecast by 2 per cent. Most of the Pentagon’s big suppliers appear to be successfully increasing profit margins through cost savings. Across-the-board sequestration spending cuts have also been feeding through more slowly to the biggest procurement programmes than contractors had expected. Northrop’s sales declined 3 per cent to $6.1bn. Diluted earnings per share increased 14 per cent to $2.14, well above analysts’ consensus estimates of $1.82.

Boeing

23 Oct 13. The Boeing Company (NYSE: BA) reported third-quarter core earnings per share (non-GAAP) increased 16 percent* to $1.80, driven by strong performance across the company’s businesses. Third-quarter core operating earnings (non-GAAP) increased 20 percent* to $2.1bn from the same period of the prior year. Third-quarter revenue was $22.1bn, GAAP earnings from operations was $1.8 bn and earnings per share was $1.51. Core earnings per share guidance increased to between $6.50 and $6.65 and GAAP earnings per share guidance increased to between $5.40 and $5.55, reflecting the strong performance. The company also increased its 2013 operating cash flow outlook to greater than $7bn, which includes $1.5bn of discretionary pension contributions, and reaffirmed its 2013 revenue guidance.

“Consistently strong operating performance is driving higher earnings, revenue and cash flow as we deliver on our record backlog and return
increased value to shareholders,” said Boeing Chairman, President and CEO Jim McNerney. “During the quarter, Commercial Airplanes completed the first flight of the 787-9 and delivered 170 airplanes, while Defense, Space & Security maintained solid performance and captured $7bn in new orders. Despite the uncertainty of the U.S. defense market, overall our customer-focused business strategies and disciplined execution on our programs are producing the results we expect, and our strong year-to-date performance and positive outlook allow us to increase our 2013 guidance for earnings and operating cash flow.”

Boeing Commercial Airplanes

Boeing Commercial Airplanes third-quarter revenue increased to $14.0bn and operating margin improved to 11.6 percent on higher delivery volume and continued strong operating performance. During the quarter, the 787-9 completed first flight. With the successful launch of the 787-10 and continued strong demand for the 787 family of airplanes, the company intends to increase the 787 production rate from 10 to 12 per month in 2016, with plans to increase to 14 per month before the end of the decade. Commercial Airplanes booked 200 net orders during the quarter. Backlog remains strong with nearly 4,800 airplanes valued at a record $345bn.

Boeing Defense, Space & Security

Boeing Defense, Space & Security’s third-quarter revenue was $8.0bn, while operating margin was 8.4 percent. Boeing Military Aircraft (BMA) third-quarter revenue was $3.5bn, primarily reflecting lower delivery volume. Operating margin decreased to 6.2 percent, impacted by mix and one-time charges on the F-

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