A disappointing year for Lockheed Martin Corp. grew even darker yesterday as the Bethesda aerospace giant warned investors that earnings will be lower than expected for the fourth quarter, the year and even 1999.
The company's stock dropped like a lump of coal on the news, closing down $10.50 at a 52-week low of $84.50.
"They've had a lot of problems and this is a crowning blow at the end of the year," said financial analyst Paul H. Nisbet of JSA Research Inc.
Expectations were already down because of a similar warning the company issued last month, but the situation is even worse because of lagging commercial space business and delays in rocket launches and deliveries of C-130J military transport planes.
To top it off, acting Air Force Secretary F. Whitten Peters said yesterday that he does not intend to rescue the company's production plant in Marietta, Ga., by purchasing C-130Js sooner than planned.
Lockheed Martin officials put as positive a face on the day's financial announcements as they could manage, but said they were trying to adjust the expectations of analysts and investors to a realistic level.
"While it is very disappointing to all of us I don't think we're without opportunity to move forward," Marcus C. Bennett, chief financial officer, told Wall Street analysts in a conference call.
The company said its fourth-quarter earnings per diluted share -- to be reported the week of Jan. 25 -- are likely to be 10 percent below the $1.79 logged for the fourth quarter of 1997.
Analysts had expected the company to earn $2.06 a share in the quarter.
For the year, earnings per share excluding one-time charges or gains are expected to be up 2 percent to 4 percent -- far from the low double-digit growth Lockheed Martin forecast going into 1998.
The company still expects to reach 10 percent growth or better in 1999, but that is softer than expected because the figure is based on the lower estimates for this year.
It also includes a number of aircraft deliveries and space launches that were supposed to take place in 1998, leading analysts to worry that the company's woes will continue.
Company executives said investments this year in the areas of telecommunications, space launches, information technology and postal automation will boost the bottom line in 1999.
"We fully anticipate these investments to generate significant sales and earnings growth in the future, with commensurate growth in shareholder value," said Vance Coffman, chairman and chief executive officer.
The news closes an unusually grim period for the world's biggest defense contractor and nation's second-biggest aerospace company. Early this year, federal anti-trust regulators unexpectedly torpedoed Lockheed Martin's attempt to purchase Northrop Grumman Corp., and the company lost a major missile defense contract to rival Boeing Co. around the same time that its troubled Army missile program suffered a high-profile test failure.
An $8 billion sale of F-16s to United Arab Emirates was supposed to close during the fourth quarter but has wandered into next year, and the Air Force has postponed Titan rocket launches as it investigates a booster explosion.
In October, Lockheed Martin warned the Pentagon that its C-130J production line would virtually grind to a halt in the next two years unless the Air Force accelerates the purchase of 150 planes it intends to buy beginning around 2002.
Peters, the Air Force secretary, said yesterday that he has no plans to rush the purchase but hopes to work with Lockheed Martin to avoid problems at the Georgia factory where they are built.
That plant also conducts final assembly of the F-22 fighter plane, and Lockheed Martin has warned that the already expensive F-22 will have to shoulder all the overhead costs for the 3 million-square-foot factory if the C-130J line peters out.
The company had hoped to deliver 30 C-130J airplanes this year -- mostly to foreign customers -- but so far has completed only 19. The delay has been caused by modifications to each plane requested by the customers, said corporate spokesman James Fetig.
The factory plans to complete as many as six more planes by the end of the year.
After that, fewer than 10 orders are on the books for each of the next few years -- a level that executives say is too low to run the production line efficiently.
But the Air Force secretary's refusal to pump up those numbers will not cause a crisis, Fetig said.
International sales and potential orders from the Marine Corps should keep the production line running, he said, adding that "we are working very hard to make the sales needed."
Many analysts were not placated by that promise or the company's insistence that the financial picture will get no worse next year.
"It doesn't sound like they're turning it around, they're just cutting expectations way back," said analyst Nisbet. "It was just not a good day at all."
Pub Date: 12/24/98