Military ship and submarine builder Newport News Shipbuilding Inc.
on Friday posted flat fourth-quarter earnings, but beat targets in part on a ramp-up in activity on the Virginia
-class submarine and a stock buyback that cut the number of shares outstanding.
For 2001, the company said revenues would be even with last year, as first-quarter revenues are hurt by submarine volume reported in the last quarter of 2000. Still, per-share profits should grow due to improved margins.
Virginia-based Newport News, maker of the world's largest warships, reported fourth-quarter net income of $24 million, unchanged from a year ago. On a per share basis, the company had earnings of 74 cents on 31.9 million shares outstanding for the quarter, compared with 69 cents per share on 34.3 million shares in the same period of 1999.
Analysts had pegged Newport News at a profit of 67 cents per share, according to First Call/Thomson Financial, which tracks estimates.
Sales rose 7.4 percent to $578 million for the quarter, primarily due to results from the construction segment. Newport News generated $52 million of free cash flow during the quarter, bringing full-year free cash flow to $163 million.
"We exceeded our top-line growth objectives, achieved targeted operating margins in our major programs and delivered improved EPS performance through earnings gains as well as our successful share repurchase program," said William Fricks, chairman and chief executive.
Newport News expects to generate free cash flow of $110 million in 2001 with earnings growth of 10 percent to 12 percent. Wall Street currently expects the company to report a profit of $2.98 per share for 2001, compared with $2.77 per share in 2000.
The construction segment should continue to grow and account for about half of the company's full-year revenues, Newport News said on a conference call.
Results from the engineering operation will gain on increases in design work for the Nimitz-class nuclear aircraft carrier while fleet services results should decline due to the timing of refueling work.
Newport News said it was on track to deliver the Ronald Reagan aircraft carrier, the ninth Nimitz-class carrier, in early 2003.
Last week, Newport News won a $3.8 billion U.S. Navy contract to design and construct the 10th and last Nimitz-class nuclear aircraft carrier. The unnamed carrier is scheduled for delivery in 2008 and should boost results from the construction segment.
Under the deal, the company will also deliver the ship's warfare systems, which was a task previously performed by the Navy. That includes development and procurement of the warfare system through a subcontract to Lockheed Martin Corp., which should account for about $500 million of the contract's total value.
The company also made progress during the fourth quarter on the Virginia-class submarine construction program, including the initial completion and transfer of modules between Newport News and its teaming partner.
The fleet services segment benefited from aircraft carrier refueling activity and naval and commercial ship repair work. The engineering segment performed design work on the propulsion plant for the next generation of aircraft carriers under a two-year $161 million research and development contract awarded in October.
Shares of Newport News have steadily risen over the past year, outperforming the broad Standard & Poor's 500 index by about 100 percent. The stock touched a high of $57.50 in December, up from its low of $24.81 in December 1999.
Newport News stock fell 57 cents to $49.75 in early trading on the New York Stock Exchange. - (Reuters)