Lockheed Martin Corp., the world’s largest defense company, said first-quarter profit rose 17 percent on sales of jet fighters and computer services to the U.S. government.
The company increased its full-year earnings forecast. Net income climbed to $690 million, or $1.60 a share, from $591 million, or $1.34, a year earlier. Sales grew less than one percent to $9.28 billion, the company said today in a statement.
Lockheed completed development of the F-22 stealth fighter, known as the Raptor, in December 2005, and a total of 91 planes had been delivered as of the end of March. Chief Executive Officer Robert Stevens also reduced Bethesda, Maryland-based Lockheed’s reliance on aircraft by expanding sales of computer services to the U.S.
government through acquisitions and new contract wins.
“Aeronautics sales were 8.9 percent above our estimate,” Joseph Nadol, a New York-based analyst with J.P. Morgan Securities Inc., wrote in a note to clients today. “Overall, we calculate that organic sales were about flat with the prior year, while the net effect of the acquisitions and divestitures resulted in a modest 1 percent increase to sales.” Aircraft profit rose 20 percent to $299 million in the quarter, due in part to improved performance on the F-22 and F- 16 jet-fighter programs, the company said. Sales were little changed at $2.82 billion.
F-22 Contract In January, Lockheed won a $255 million contract modification to its F-22 award to begin preparing for delivery additional jet fighters to the U.S. Air Force. The order will help pave the way for shipments that are part of a $7 billion contract for more than 60 aircraft.
“Aeronautical is primarily a margin expansion story as programs like the F-22 mature,” George Shapiro, a New York- based analyst with Citigroup Inc., wrote in an April 9 note. He rates the shares a “buy.” “While growth for most companies’ information-technology businesses have slowed in recent quarters, Lockheed has won significant market share.” Shares of Lockheed fell $2.01, or 2.1 percent, to $95.06 at 10:11 a.m. in New York Stock Exchange composite trading. They have gained 3.3 percent so far this year.
The average of 13 analyst estimates compiled by Bloomberg was for profit of $1.37 a share in the quarter. Sales were projected to climb to $9.52 billion from $9.21 billion.
The quarter’s results included a gain of 21 cents a share from the sale of land, the reversal of a legal reserve and a tax benefit.
Excluding those one-time items, profit was $1.39 a share.
Increased Forecast The company raised its 2007 profit forecast to reflect those gains and recent acquisitions. Lockheed increased its earnings per share projection to $6.20 to $6.35, from a previous range of $5.80 to $6. The sales forecast was boosted to $40.4 billion to $41.4 billion, from $40.3 billion to $41.3 billion.
About 14 cents to 19 cents of the increase to the earnings forecast is a result of better profit margins, Chief Financial Officer Christopher Kubasik said in an interview.
“The margin improvement across all the business areas clearly was one of the key drivers to our strong earnings,” Kubasik said. “It also enabled us to increase our outlook for the full year. The increased focus on flawless program execution and cost reduction are contributing to the bottom line.” The F-22 program is an example as the company continued to deliver “zero-defect aircraft” to the Air Force under that contract, he said.
Lockheed’s results for the period included those of at least four purchases made in government-computer services during the 12 months ended March 30. It didn’t disclose the terms for any of those transactions.
Information Systems That helped lift revenue at the company’s information systems and global services group by 8.9 percent to $2.15 billion. Profit gained 11 percent to $199 million.
Citigroup’s Shapiro estimated Lockheed gained about $200 million in sales in the quarter from acquisitions.
That was roughly equal to the amount of revenue Lockheed lost after the company shifted government-rocket launching operations into a joint venture with Chicago-based Boeing Co., the second-largest U.S. defense company, Shapiro said.
The Lockheed-Boeing venture, established in December and called the United Launch Alliance, will launch rockets carrying government satellites and have almost $2 billion in annual sales. Combining the two companies’ efforts was projected to save $100 million to $150 million on launch costs annually.
The space group was the only one of Lockheed’s four main divisions to report both lower sales and profit. Space sales dropped 8.9 percent to $1.79 billion, while profit fell 3.6 percent to $186 million.
