Northrop Grumman Corp. is buying back $700 million worth of its stock in the first share repurchase in its history.
The move is intended to give an added lift to Northrop's per-share price, which has been rising steadily since March but remains well below the $130 range it achieved last summer.
Because the company will retire the stock it buys, each remaining share will make up a larger piece of the company and become that much more valuable.
The program also indicates to Wall Street that the company's board of directors is satisfied with the recent integration of other defense companies into its mix, including Newport News Shipbuilding and, more recently, TRW.
"It shows they're happy with the acquisitions that they have put in place," said Peter Arment, a stock analyst with JSA Research Inc., in Newport, R.I. "They think buying back their shares is a good use of $700 million [rather] than investing it in something else."
The nation's No. 2 defense contractor is using cash from operations to finance the purchase.
"Today's decision reflects our high degree of confidence in the company's operations, financial performance and outlook," said Ronald D. Sugar, Northrop's president and chief executive officer.
Also yesterday, the company's board of directors declared a dividend of 40 cents per share, unchanged from the previous quarter. That dividend will be paid Sept. 13 to shareholders of record as of Sept. 3.
The repurchase program, which will take place over 18 months, would amount to 7.4 million shares at yesterday's closing price. Northrop has 183 million shares outstanding.
"That's a significant amount" for a buyback, Arment said.
Northrop's stock dropped $1.86, or 1.9 percent, to close at $94.22 yesterday on the New York Stock Exchange. The buyback announcement was made after trading ended.
The Daily Press, of Newport News, Va., is a Tribune Publishing newspaper.