COMPANIES

Northrop CEO: Look beyond the budget showdown

A broader perspective looks promising for growth

Northrop Grumman CEO Wes Bush attempted to look beyond the ongoing talks in Congress on a plan to keep the government running during the company’s first quarter earnings call with investors Wednesday.

Congress must either extend the current continuing resolution or pass a new funding measure by 11:59 p.m. Friday to avert a government shutdown.

Instead, Bush sought to draw analysts’ attention to what he called the “broader trend lines in the national security community.”

“Absent some dramatic event, we should expect a modest upward trend for the foreseeable future in national security spending,” he said in the call.

Bush added Northrop and industry at-large is used to a CR but that until recent years those have lasted no more than a quarter.

“At this point this is one of the longest running CRs I can remember, which is unfortunate,” he said.

Excluding the current situation on Capitol Hill, President Donald Trump’s most recent budget request indicates growth in defense spending for the short term.

Trump has called for a $639 billion Defense Department budget for fiscal year 2018 -- 10 percent higher than the previous year -- and also proposed a separate $30 billion supplemental package for 2017.

Slow pacing of appointments and limited time to make a budget imprint are constraints on new administrations, Bush said, so any priority and funding shifts will not be fully known immediately.

“The better indicator of national security investments will be the ‘19 submittal, the first time a more broadly populated team in the new administration has the ability to put an imprint on a comprehensive national security approach,” Bush said to investors.

The Pentagon is operating on a $578 billion budget through September at 2016 spending levels under the current continuing resolution.

Shares in Northrop recovered from a lower open Wednesday and were poised to close relatively unchanged despite an earnings guidance boost and first quarter results above Wall Street’s expectations on the bottom and top lines.

Northrop lifted full-year earnings guidance to $11.80-$12.10 per share versus the prior $11.30-$11.60 range. First quarter earnings came in at $3.13 per share versus the $2.92 analyst consensus.

Revenue for the quarter totaled $6.27 billion compared to Wall Street’s $6.11 billion forecast. Northrop reiterated its full-year sales forecast of $25 billion. The company reported $24.5 billion in revenue last year.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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