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Lockheed Profit Up 8% On Electronics, Space

Defense Firm Raises 2005 Forecast

By Renae Merle
Washington Post Staff Writer
Friday, January 28, 2005; Page E05

Lockheed Martin Corp., the nation's largest defense contractor, yesterday reported an 8 percent increase in fourth-quarter profit as its electronics systems business, which includes Patriot missiles, and its space unit gained.

The Bethesda-based company also raised its revenue forecast for 2005 to $36 billion to $37.5 billion, up from its previous projection of $34.5 billion to $36 billion.

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"We're really satisfied with the way the company is moving forward," said Christopher E. Kubasik, Lockheed's chief financial officer.

After 2005, however, Lockheed's outlook becomes murkier, analysts said. For the 2006 budget, the Pentagon has proposed reducing the size of two of Lockheed's largest programs, the F/A-22 fighter and C-130J transport aircraft. "We believe it will be impossible for Lockheed Martin to escape from . . . budget pressures," said Merrill Lynch analyst Byron K. Callan.

Lockheed reported profit in the quarter of $372 million (83 cents a share) compared with $344 million (77 cents) in the fourth quarter of 2003. Revenue increased to $9.96 billion from $8.98 billion. The quarter included several charges and one-time gains that reduced earnings overall by $10 million, or 2 cents a share. The charges included $180 million for a court ruling against Lockheed over a failed Energy Department contract to clean up a radioactive-waste dump in Idaho.

For the year, Lockheed reported profit of $1.2 billion ($2.83), compared with $1 billion ($2.34) in 2003. Revenue was $35.53 billion, up from $31.82 billion.

Lockheed shares gained $1.17, to $56.40, on the New York Stock Exchange yesterday.

"This was a strong quarter from Lockheed," said Joseph B. Nadol III, aerospace and defense analyst for J.P. Morgan Securities Inc.

The electronic systems unit, which includes the Patriot missile and a new Navy littoral combat ship, reported that revenue increased to $3.11 billion in the quarter compared with $2.60 billion in the fourth quarter of 2003. Profit was $325 million, up from $241 million.

For the year, revenue in the unit increased to $9.72 billion from $8.99 billion in 2003.

The company's space systems unit, which includes military and commercial satellites, reported the fastest growth during the quarter. Revenue increased to $1.8 billion from $1.45 billion, and profit increased to $127 million from $103 million. Sales were boosted by the delivery of two commercial satellites, the company said.

For the year, revenue in the unit increased to $6.36 billion from $6.02 billion. Profit was $489 million, up from $403 million in 2003.

Revenue at the company's largest unit, aeronautics, which includes its fighter jet programs, was flat at $3 billion in the fourth quarter, while the division's operating earnings rose to $229 million from $200 million. The weakness was attributed to fewer deliveries of C-130Js and less revenue from its F-16 program.

For the year, the unit reported that revenue rose to $11.78 billion from $10.20 billion in 2003, and operating profit increased to $899 million from $690 million.


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