THIS NEWS IS HUGE:
Northrop shares dip on pension income concerns
NEW YORK, Dec 6 (Reuters) - Shares of defense contractor Northrop Grumman Corp. (NYSE: NOC) slid nearly
3 percent on Wednesday, reversing Tuesday's gains, on concerns about the effect of lower income from pension funds
on total earnings next year.
The stock dipped $2-5/16 to $82-11/16 on the New York Stock Exchange, off a year high of $93-7/8, but up from
a low of $42-5/8. Northrop's weakness combined with declines across the sector pushed the Standard & Poor's
aerospace and defense index down 2.73 percent to 1,380.57 as the broader market fell.
On Tuesday, Northrop told investors and analysts at a conference here that earnings for 2001 should be in the range
of $8.70 to $9.00 per share, with pension income totaling about $450 million to $470 million.
However, if pension income hits $500 million to $520 million, reported earnings in 2001 would be up another 45 cents
to $9.15 to $9.45 per share, in line with analysts' target of $9.37 per share, according to tracking firm First
Call/Thomson Financial.
Meanwhile, Goldman Sachs analyst Howard Rubel lowered his earnings estimate for 2001 to $9.40 from $10.00 per
share, but maintained his rating of market outperformer. Bear Stearns kept a neutral rating on the stock.
Pension fund proceeds account for about half of Northrop's earnings. Before pension income, earnings are expected
to rise 15 percent, the company noted, adding that operating gains from information services and defense electronics
could offset pension fund returns.
Northrop's dependence on income from pension funds makes it unique in the defense and aerospace sector. Other
companies, particularly financial services firms, have also booked pension fund gains in their bottom lines.
Northrop did not change guidance for 2000 during its conference, which featured the chief executive officer and the
chief financial officer as well as the presidents of its three operating segments.
The company also noted that cash flow was on track to beat targets given during the third quarter. Northrop expects
operating cash flow in the range of $600 million to $700 million this year, but it may exceed that range.
"We may beat the high end of that range," Chief Financial Officer Dick Waugh said.
Shares rose $2.56 to $85 on Tuesday.
siliconinvestor.com
THIS IS THE START OF ANOTHER TREND. GE, IBM, AT&T etc...where the pension used to help earnings it will not only stop helping but start really hurting...gains in pension helped earnings...that will be gone....then companies will have to start kicking into pensions again...bye bye profits and cashflow. |
