WASHINGTON — Two of the nation's biggest military contractors reported divergent second-quarter earnings Thursday, results that come as the defense industry begins to sort out the impact of shifting priorities in Pentagon weapons-buying strategies.
Military electronics maker Raytheon Co. said its second-quarter earnings rose 15 percent while Northrop Grumman Corp., best known for its Navy shipbuilding operations, reported a 20 percent drop in quarterly profits.
They follow reports earlier this week from Boeing Co. and Lockheed Martin Corp. that also suggested that the once-reliable sector is getting harder to predict.
Under priorities outlined in April by Defense Secretary Robert Gates, the Pentagon is focusing more spending on weapons needed to fight the insurgencies it faces in places like Afghanistan. That means less of an appetite for the big weapons used to fight conventional wars, like giant warships, expensive fighter jets and hulking Army vehicles. The Pentagon is expected to give further details on its future strategy this summer.
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Raytheon said Thursday that it believes it is well-positioned for the military's new direction. The company makes a wide range of sensors, radar systems, unmanned flying vehicles and missiles that it said can fit neatly into the new focus on high-tech warfare.
"We feel that over the next couple of years, Raytheon will continue to be front and center," said David Wajsgras, the Waltham, Mass.-based company's chief financial officer.
Raytheon said it earned $489 million, or $1.23 per share, in the April-June quarter, up from $426 million, or 99 cents per share, in the same quarter last year.
Sales rose 4 percent to $6.13 billion from $5.87 billion a year ago. The sales gains came in five of Raytheon's six business units.
The results beat the profit predictions of analysts polled by Thomson Reuters, who expected $1.13 per share. Raytheon's sales came in just shy of the $6.18 billion consensus prediction.
Raytheon also raised its outlook for 2009 by a nickel to a range of $4.60 to $4.75 per share. Wall Street foresees $4.73 per share in earnings.
Shares of Raytheon rose 76 cents, or 1.7 percent, to close at $45.75 Thursday, while Northrop's stock fell 87 cents, or 1.9 percent, to $46.26.
Local angle
Tucson-based Raytheon Missile Systems had second quarter 2009 net sales of $1,384 million compared to $1,363 million in the second quarter of 2008, Raytheon said in a news release Thursday.
Missile Systems recorded $147 million of operating income, compared to $158 million in the second quarter of 2008, "primarily due to higher award fees recognized in the second quarter 2008 as a result of a successful flight test milestone on Standard Missile-3," the release said.
During the second quarter this year, Missile Systems "booked $521 million for the production of Advanced Medium Range Air-to-Air Missiles (AMRAAM) for the U.S. Air Force and international customers and $260 million for Phalanx Weapon Systems for the U.S. Navy and U.S. Army," the release added. "MS also booked $207 million for the production of Tactical Tomahawk cruise missiles and $167 million for AIM-9X short range air-to-air missiles for the U.S. Navy and international customers."
Raytheon Missile Systems is Southern Arizona's largest employer, with more than 11,500 Tucson-area employees at the end of 2008.