Raytheon and Northrop Posts Gains

(MoneyWatch)  In the latest large contractor to post first quarter results Raytheon and Northrop Grumman announced that profits and earnings were up compared to a year ago. Boeing and Lockheed have also announced mixed results so far.

Raytheon saw profits up fifteen percent and earnings per share over twenty according to RTTNews. Raytheon was buoyed by several missile programs such as Patriot, Standard Missile and AMRAAM. This along with the Intelligence and Information Systems sales growth led to earnings per share of ten cents higher then analysts estimated.

Northrop Grumman also reported earnings ten cents higher then estimated and profit was up forty-seven percent compared to last year. Ship building especially had a major change moving to over $200 million in profit compared to a loss of $84 million last year. Northrop also saw growth in all other parts of the company.

Boeing did actually have decent growth in their defense sector the company being dragged down by a drop in sales of commercial aircraft due to the world's economic condition. Lockheed's results were tempered due to pension costs but they came in better then estimated due to the reduced number of shares in trade.

The concern of course is what the new Obama administration's plans for defense spending will do to these companies. All four are off to a decent start in 2009, but it can be expected if the proposed plans go through that some negative effects will be felt. The Pentagon cannot cut all of these programs with no replacements without affecting the revenue, profit and stock price of all four major U.S. defense contractors. Yes, some of the cuts will be made up with other programs or new ones; but it is clear that the Gates' plan is to focus on existing programs and shifting a focus to supporting the deployed forces. This means that rather then a few big programs dominating spending many smaller ones will be funded. This will allow a broader spectrum of companies to compete for the dollars.

Obviously the final budget is not even close to being finished and the companies may see several programs continue or be restructured rather then canceled outright. This could lead to continued growth in revenue. There could also be other opportunities in the U.S. or overseas that could limit the effect of the end of the F-22, C-17, VH-71 and DDG-1000 programs. By the end of the Summer it will be clear how the budget will fall out.