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(Reuters) -Northrop Grumman raised its full-year profit and revenue forecasts on Thursday, but shares slid when the company said it would not compete as a prime contractor for the U.S. Air Forces’ sixth-generation fighter jet.
Shares were down 4.2% during trading in New York.
Northrop (NYSE:NOC), Lockheed Martin Corp (NYSE:LMT) and Boeing (NYSE:BA) Co were expected to compete as prime contractors for the Next Generation Air Dominance (NGAD) program, which will replace Lockheed’s F-22 Raptor with a fighter built to battle alongside drones.
“We have notified the U.S. Air Force that we’re not planning to respond to the NGAD RFP as a prime,” Northrop Chief Executive Kathy Warden told investors on a post earnings conference call.
Despite side-stepping the new fighter jet competition Northrop said the war in Ukraine and tensions in the Indo-Pacific have compelled countries in these regions to ramp up their military spending.
“There is strong demand across Europe,” Dave Keffer Northrop’s CFO told Reuters in an interview. “We had eight potential new customers come in for a demonstration of our IBCS capabilities – our integrated battle management system – that has been in very high demand.”
Munitions and missile defenses were two other high-demand areas Keffer highlighted.
European demand for U.S. weaponry is soaring, but instead of big-ticket items like jets and tanks, shopping lists are focused on cheaper, less-sophisticated items such as shoulder-fired missiles, artillery, and drones that have proven critical to Ukraine’s war efforts.
Northrop’s aeronautic systems business, which houses its new B21 Raider jet program, posted a 2% rise in sales at $2.60 billion in the second quarter.
Sales in its space system business, which makes satellites and payloads, jumped 17% to $3.49 billion, helped by a surge in investment for space exploration projects.
Northrop raised the lower end of its annual profit forecast from $22.25 per share. It now expects 2023 profit to be in the range of $22.45 to $22.85 per share.
The company also raised its annual sales outlook to between $38.4 billion and $38.8 billion, compared with its previous projection of $38 billion to $38.4 billion.
Its net earnings came in at $812 million, or $5.34 per share, in the three months ended June 30, compared with $6.06 a year earlier.
Northrop’s overall sales in the quarter rose 9% to $9.57 billion.
