Lockheed beats forecasts with 6% rise in 1Q profit

Associated Press

April 23, 2008

WASHINGTON - Defense contractor Lockheed Martin Corp. said yesterday that its first-quarter earnings rose 6 percent as higher sales of space equipment, missiles and other combat tools offset a dip in sales of fighter jets.

Lockheed, the world's largest defense supplier, said it earned $730 million, or $1.75 per share, up from $690 million, or $1.60 per share, in the first quarter of 2007. Revenue for the period increased to $9.98 billion from $9.27 billion.

Analysts surveyed by Thomson Financial expected Lockheed to make $1.63 per share on sales of $9.69 billion. Lockheed's first quarter included an extra week, which some analysts said likely contributed to the higher earnings and results above the Wall Street consensus.

The Bethesda-based company also raised its outlook for 2008 by 10 cents, saying it expects to earn between $7.15 billion and $7.35 billion for the year on revenue of $41.8 billion to $42.8 billion. Much of the improvement is expected to come in the company's space division, including its new joint rocket launch business with Chicago-based Boeing Co.

The company's projections still came in shy of Wall Street analysts' forecasts.

Shares fell $2.78, or 2.6 percent, to close at $103.79 yesterday.

The company's aeronautics division, its largest by revenue, saw sales drop slightly to $2.8 billion as it continues to make the transition from selling older fighters like the F-16 to new models such as the F-35 and F-22. Lockheed has said it expects 2008 to be a trough year for combat aircraft before sales start to rise again.

But Lockheed's three other business divisions posted higher sales.

Defense contractors have largely weathered the nation's bout of economic malaise, benefiting from still lofty military spending and multiyear Pentagon contracts that often last longer than business cycles. Lockheed holds a massive contract for the new F-35 fighter jet for three branches of the military, and has a stake in shipbuilding and other big defense projects.

Lockheed Chief Financial Officer Bruce Tanner said in an interview that the only effect the nation's credit squeeze had on the company is that lower interest rates have reduced the money Lockheed makes on its cash holdings of about $3 billion.

"One of the reasons that I could only increase the earnings [forecast] a dime this quarter is that the cash I've got sitting on the balance sheet is making less interest," Tanner said.

Lockheed and the Pentagon have faced sharp criticism over some programs, including the F-35, which is now expected to cost $298.8 billion over the lifetime of the program for the Joint Strike Fighter.