Lockheed Martin Reports Strong Third Quarter Results
From the Associated Press
Strong results across its four business units pushed third quarter earnings up 22 percent Tuesday at defense contractor Lockheed Martin, as the company beat Wall Street expectations and boosted its outlook for 2007.
But the improved forecast and 2008 earnings guidance still fell shy of analyst predictions for Bethesda-based Lockheed, the world's largest maker of fighter jets, missiles and other military equipment.
The company reported earnings of $766 million, or $1.80 per share, up from the $629 million, or $1.46 per share it posted in the year-ago quarter. Revenue came in at $11.1 billion, a 16 percent improvement over the 2006 third quarter result of $9.6 billion.
That easily beat the consensus of analysts surveyed by Thomson Financial, who expected Lockheed to earn $1.64 per share on revenue of $10.38 billion.
The company notched up its 2007 outlook by five cents, saying it expects to earn between $6.70 and $6.85. The company held to its previous revenue estimate of between $41 billion and $41.75 billion. Lockheed Chief Financial Officer Bruce Tanner said the nickel improvement came mostly from a "tweak" of corporate expenses.
For 2008, Lockheed forecasts earnings between $6.95 and $7.15 per share.
Analysts are more bullish, predicting $6.87 per share earnings for 2007 on revenue of $41.69 billion. For 2008, earnings are forecast at $7.23 per share.
While most applauded the strong third quarter, some analysts said Lockheed was exhibiting a typical conservatism on its future earnings guidance that likely would disappoint investors hoping for signs of more big quarters going forward.
"Fairly tepid guidance for the remainder of this year and 2008 would seem to indicate that the company faces some challenges ahead in continuing to beat expectations," wrote Joseph B. Nadol III in a research note.
Tanner, who took over as Lockheed's CFO two months ago, said Lockheed expects a downturn in its aeronautics unit as big fighter programs like the F-16 are phased out and the new F-35 jet slowly ramps up. Fourth quarter aeronautics results could be down $500 million from the third quarter and $1 billion lower in 2008. Lockheed has long said this would happen, but analysts may not be listening, Tanner said.
"A lot of folks on the Street have discounted that and said we are not forecasting properly. I think we are," he said.
Lockheed and other military contractors have benefited from big boosts in defense spending as the Pentagon wages war in Iraq and Afghanistan. Yet some analysts suspect a peak may be near for Pentagon budgets as the 2008 presidential elections loom and the debate continues over when to withdraw troops from Iraq.
All of Lockheed's four business segments reported increases in sales for the third quarter.
Aeronautics posted a 16 percent increase in sales to $3.34 billion. That included higher sales in fighter jets and the C-130J transport plane programs.
Electronic systems, which makes missiles and other warfare equipment, was up 10 percent to $2.83 billion. Information systems and global services revenue rose 24 percent to $2.7 billion while Lockheed's space business was up 19 percent to $2.2 billion.
For the first three quarters of 2007, Lockheed earned $2.2 billion, or $5.21 per share, on revenue of $31 billion.
Despite the strong quarter, the company has had some stumbles this year, on projects like Coast Guard ships and a shallow water warship for the Navy. In September, the Air Force said it was in talks with Lockheed over an $11.7 billion contract to retrofit 108 C-5 aircraft. Costs are 15 to 25 percent higher, leading the Air Force to warn it could terminate the program if costs continue to rise.
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Posted by: LOCKHEED SUPPORTS GOING TO WAR. BENEFITS FROM WAR. | November 2, 2007 1:42 PM
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