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By Pratyush Thakur, Mike Stone
(Reuters) -U.S. defense company Northrop Grumman on Thursday raised its 2024 profit forecast for the second time amid increased global defense spending prompted by conflicts in the Middle East and the protracted Russia-Ukraine war.
The company's shares were up 1% during pre-market trading.
Geopolitical tensions have benefited arms manufacturers such as Lockheed Martin and RTX, both of which also raised their 2024 earnings forecasts.
Northrop now expects adjusted profit per share between $25.65 and $26.05 for the full year, compared with its previous forecast of $24.90 to $25.30 per share.
The company kept its annual sales forecast unchanged, projecting it to reach up to $41.4 billion.
For 2025, Northrop said that it expects margin dollars to grow at a faster pace than sales, and forecast a roughly $1.5 billion reduction in capital expenditure on Thursday.
"Sales remain on target for 5% growth this year and the deliberate actions we are taking to improve margin rates have resulted in further expansion this quarter," Northrop CEO Kathy Warden said.
Like many in the defense industry, Northrop has faced challenges on some of its fixed-price contracts due to inflation, strained supply chains, and labor shortages. Competitor Boeing has incurred billions in losses on fixed price contracts for the Pentagon.
Northrop works on some of the most complex defense programs including the nuclear-capable B-21 Raider, a long-range stealth bomber and the replacement for the ground-based U.S. nuclear arsenal anchored by the Minuteman III network intercontinental ballistic missiles (ICBM) known as Sentinel.
The company posted earnings per share of $7 for the third quarter ended Sept. 30, beating the average analyst estimate of $6.07, according to data compiled by LSEG. Sales rose 2% to around $10 billion.
(Reporting by Pratyush Thakur in Bengaluru; Editing by Shailesh Kuber, Shounak Dasgupta and Nick Zieminski)
