Defense contractors Northrop Grumman Corp and General Dynamics posted better-than-expected quarterly earnings on Wednesday as segments that had been a drag on performance showed signs of improvement.

Northrop Grumman raised its full-year outlook, and its stock rose more than 1 percent. Shares of General Dynamics, whose revenue trailed expectations, were off less than 1 percent.

At Northrop, the shipbuilding division turned in a 25 percent sales increase and a 26 percent rise in operating profit. Northrop has been working to turn around this operation, where quality issues have resulted in quarterly charges in the past.

Northrop, which also makes unmanned spy planes, said first-quarter net earnings rose 21 percent to $469 million as it benefited from decreases in its share count and pension expense.

Per-share profit of $1.53 beat the analysts' average estimate by 21 cents, according to Thomson Reuters I/B/E/S.

Sales rose 8.5 percent to $8.61 billion, above analysts' estimates of $8.07 billion.

IMPROVING AEROSPACE HELPS

In General Dynamics' first-quarter results, a decrease in operating costs had helped offset lower revenue as war-related product demand slowed.

The business jet division had a 6.7 percent sales decline, but posted 9 percent rise in operating earnings. Margins in that division, which has suffered from weak demand in the recession, improved to 16.1 percent from 13.7 percent a year earlier.

General Dynamics' net earnings edged up 1.2 percent to $597 million, or $1.53 a share.

Excluding discontinued operations, profit was $1.54 a share, beating analysts' forecasts by 3 cents.

Revenue fell 6 percent to $7.75 billion, below analysts' estimates of $8.15 billion.

Among divisions, revenue in the combat systems unit, which provides tanks, was down 17 percent, while aerospace revenue fell about 7 percent. Operating costs and expenses fell 7 percent.

General Dynamics shares were off 0.5 percent at $76.15 in morning trading, while Northrop Grumman rose 1.4 percent to
$68.15.

(Reporting by Karen Jacobs; Editing by Lisa Von Ahn)