Northrop Grumman Corp., reported third quarter net income of $302 million (86 cents per share), up 3 percent from $293 million (81 cents) for the same period a year earlier.

Revenues for the Los Angeles-based defense and government contractor were up nearly 2 percent to $7.43 billion as the nation’s largest shipbuilder finalized recovery from an $850 million loss at its gulf coast shipyards from last year’s brutal hurricane season.

Legal expenses around $112 million from TRW Inc., acquired by Northrop four years ago, also hurt profit but left the nation’s third-largest government contractor about were analysts thought it would be, according to polls. However, the company to cut its 2006 earnings forecast to $4.20 to $4.25 a share from an earlier forecast of $4.35 to $4.45 and its revenue forecast by about $300 million.

The earnings come after Northrop was passed over for two multi-billion contracts this quarter, one to build the new space vehicle for NASA and one for implementation of a new boarder security system for the Department of Homeland Security. Each contract could have been up to $8 billion.

Shares in Northrop closed down $1.13 to $68.04 Tuesday.