Lockheed Reports Jump In Profit
Sales Increase In All Divisions

By Michael S. Rosenwald
Washington Post Staff Writer
Wednesday, October 24, 2007

Lockheed Martin said yesterday that its third-quarter profit surged 22 percent, beating Wall Street's expectations, as it continued to post strong sales in its satellite and fighter-jet businesses.

The Bethesda firm, which has benefited, like other defense contractors, from government spending related to the wars in Afghanistan and Iraq, posted revenue of $11.1 billion, an increase of 16 percent. It was the largest quarterly gain in sales since 2004.

"We had incredible performance across all four of our business areas," said Bruce L. Tanner, who became Lockheed's chief financial officer last month.

For the quarter, Lockheed Martin had a profit of $766 million ($1.80 a share), up from $629 million ($1.46) in the comparable period a year ago. Analysts had expected the company to post a profit of $1.64 per share.

Sales in Lockheed's aeronautics business, which includes fighter jets ranging from the aging F-16 to the new F-35, increased 12 percent, to $3.34 billion. Sales in the business segment including satellites jumped 19 percent, to $2.21 billion. Electronic systems sales, which include air defense programs and fire control systems, rose 10 percent, to $2.83 billion.

The steepest sales increase -- 24 percent, to $2.71 billion -- was in information systems and global services. Lockheed attributed the growth primarily to last year's acquisition of Pacific Architects and Engineers, a California company that provides support to the State Department and the United Nations.

"It was a great quarter. High quality," said Myles Walton, an analyst with CIBC World Markets. "Sales came in well above expectation."

Lockheed increased its full-year profit estimate by 5 cents a share, to $6.70 to $6.85. Analysts are expecting $6.87 per share.

For 2008, Lockheed projects earnings per share of $6.95 to $7.15, somewhat below Wall Street's expectation of $7.23 per share. Tanner told analysts and investors during a conference call that aeronautics sales would be down $1 billion in 2008, in part because of a slowdown in F-16 and F-22 production. He said the dip in sales would be temporary as the company's F-35 program ramps up.

Commercial satellite sales will also be down, Tanner said.

While Walton said some investors had "a lower level of excitement about the guidance versus the high-quality quarter," he noted that Lockheed is typically conservative with its projections. "It's pretty clear that their pattern is to start conservative and build over the course of the year."

Shares of Lockheed closed yesterday at $106.97, down 27 cents.