Lockheed Martin Corp. raised its annual profit forecast, providing a glimpse into how the company will fare after a spate of dealmaking reshapes operations amid constrained defense spending.
Earnings will be $11.50 to $11.80 a share in 2016, compared with the $11.45 to $11.75 range forecast in January, Lockheed said in a statement Tuesday. The company raised its guidance for sales to between $49.6 billion and $51.1 billion from a range of $49.5 billion and $51 billion.
The improved outlook comes in part from the savings achieved by the elimination of 1,000 jobs from the aeronautics unit, the company’s largest division and the source of about one-third of revenue. Another boost to profit margins is expected from the company’s , which was announcd in January.
Information Systems and Global Solutions has operations in Boulder, Colorado Springs and Aurora, although a majority of those workers were moved under the umbrella of Lockheed’s Space Systems and Mission Systems and Training divisions.
Lockheed Martin’s commercial space division is also in Colorado and the company also has a joint venture with Boeing that makes rockets — the Centennial-based United Launch Alliance.
ULA .
First-quarter earnings of $2.79 a share, excluding a one-time accounting loss, exceeded the $2.60 average of 17 analysts’ estimates compiled by Bloomberg. Revenue of $11.7 billion exceeded the $11.4 billion analysts anticipated.
Costs associated with job cuts decreased first-quarter earnings by $64 million, or 21 cents a share.
Investors are trying to figure out how Lockheed will fare longer term as it absorbs a $9 billion Sikorsky acquisition amid a depressed commercial helicopter market and prepares to spin off a low-margin information technology division, said Douglas Rothacker, a defense analyst with Bloomberg Intelligence. Compounding the challenge: first-quarter margins fell in every Lockheed business unit from from a year earlier, while total operating margin dipped to 11.1 percent from 13.4 percent.
“There’s still a lot of uncertainty about what is their core business for the full year,” Rothacker said in a telephone interview. Shedding the information technology business should help margins later in the year, he said. “We’d expect the cost-cutting initiatives that they announced for the aeronautics business to presumably have some profitability impact in the latter part of the year.”
Profit margins have been squeezed as the company resolved technical issues that delayed the F-35, the Pentagon’s most expensive weapons system, then worked to speed production at factories. The company plans to deliver 53 of the advanced fighter jets this year, doubling output to about 100 of the stealth aircraft by 2018.
“We’re particularly encouraged by the revenue performance, which is a sign of things to come as its customer end markets improve,” Robert Stallard, an aerospace analyst with RBC Capital Markets, said in a note to clients. “We had not expected a guidance increase at this early stage of the year, so that is another bonus — more than offsetting the cost of redundancies.”
