Defense contractors General Dynamics Corp. (NYSE: GD) and Northrop Grumman Corp. (NYSE: NOC) reported third quarter 2012 results before markets opened this morning. General Dynamics posted diluted earnings per share (EPS) of $1.70 on revenues of $7.93 billion. In the same period a year ago, the company reported EPS of $1.80 on revenues of $7.85 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $1.78 and $8.04 billion in revenues.

Northrop Grumman posted adjusted diluted EPS of $1.73 on revenues of $6.27 billion. In the year-ago period, the company reported EPS of $1.63 on revenues of $6.61 billion. Third-quarter results compare to consensus estimates for EPS of $1.69 and $6.34 billion in revenues.

EPS on a GAAP basis came in at $1.82 for Northrop Grumman.

Northrop Grumman’s CEO said:

Our focus on performance, effective cash deployment, and portfolio alignment continues to create value for our shareholders, customers and employees. We are working closely with our customers to bring innovative, affordable solutions to support their needs in today’s fiscally constrained environment.

Operating margins at General Dynamics fell from 12.7% in the third quarter of 2011 to 11.4% this year. At Northrop Grumman, operating margins fell from 12.5% a year ago to 11.7% this year.

General Dynamics reported a total backlog of $51.5 billion and an estimated potential contract value of an additional $26.1 billion. The consensus estimates for EPS and revenue at General Dynamics call for EPS of $7.09 on revenue of $32.32 billion.

Northrop updated its guidance for the full year. The company now expects sales to be about $25 billion, below the top of the prior estimate of $25.4 billion. Operating margins for the year is now forecast to reach into the “high 11%” range and diluted EPS is forecast at $7.35 to $7.40. The consensus estimate had called for EPS of $7.24 on sales of $25.19 billion.

The looming fiscal cliff is a huge threat to defense firms like these. A cut of $50 billion in defense spending is included in the sequestration bill, and if nothing is done to extend the deadline or revise the spending cuts, hundreds of thousands of jobs are at stake in an industry that employs well over 1 million people.

General Dynamics’ shares are inactive in premarket trading, having closed down 1.4% yesterday at $66.21 in a 52-week range is $60.60 to $74.54. Thomson Reuters had a consensus analyst price target of around $73.70 before today’s report.

Northrop Grumman’s shares are also inactive this morning, having closed at $69.66 last night, down 0.8% in a 52-week range of $52.69 to $71.25. The consensus target price for the shares was around $64.00 before today’s report.

Paul Ausick

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