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Northrop hurt by Boeing
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July 1, 1998: 12:28 p.m. ET
Defense contractor sees $200 million in lost revenue due to 747 cuts
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NEW YORK (CNNfn) - Shares of Northrop Grumman slumped Wednesday on word from its top official of a revenue shortfall from a major customer, Boeing Co.
Speaking at Tuesday's annual shareholders meeting, Northrop Chairman and Chief Executive Kent Kresa projected that production cuts of Boeing's 747 could cause as much as $200 million in lost revenue.
"However we are working with Boeing to determine the specific impact to our 1999 sales," Kresa said.
The shortfall is equivalent to about 20 percent of Northrop's projected sales to Boeing, which relies on the Los Angeles defense contractor for 747 fuselage sections and doors.
Boeing Chairman and Chief Executive Phil Condit told reporters Wednesday the aircraft manufacturer has completed a plan to restore commercial jet production to normal levels after severe problems forced it to halt work on two assembly lines last fall.
Northrop stock (NOC) was down 2-3/8 at 100-3/4 on the New York Stock Exchange. Shares of Boeing (BA) were up 1-3/4 at 46-5/16.
Still, Northrop's Kresa expects record sales growth of 4 percent in 1999 -- above the $9.2 billion in revenue expected for 1998.
And Northrop still expects to achieve cash flows sufficient to pay down debt by an average of $500 million annually over the next seven years, he said.
"We can project future, long-term growth for the company into the 21st century averaging 5 to 7 percent annually.
"This top-line growth, combined with our cash management and cost-cutting activities, will help us achieve strong, double-digit earnings growth," Kresa concluded.
Separately, Defense Secretary William Cohen reportedly prefers an out-of-court settlement over trial in the disputed $11.6 billion merger between Northrop and Lockheed Martin Corp.
The comments, reported in Defense Daily, come a day after Federal Judge Emmet Sullivan established a trial schedule - further propelling the case toward the courts.
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Northrop Grumman
Boeing
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