By Dana Hedgpeth
Washington Post Staff Writer
Wednesday, April 23, 2008
Lockheed Martin said yesterday that its first-quarter profit was up 6 percent as sales of missiles, space systems and information technology systems rose, offsetting slight decreases in its aeronautics sales.
The Bethesda company, the largest defense contractor in the world, beat the $1.63 a share that analysts had expected. Profit was $730 million ($1.75 a share), compared with $690 million ($1.60) in the corresponding period a year earlier.
Sales were up 7.6 percent for the quarter ended March 30, to $9.98 billion from $9.28 billion.
Its stock closed down $2.78, or 2.6 percent, at $103.79.
"We didn't have any losses on contracts. No delivery misses," said Bruce L. Tanner, Lockheed's chief financial officer. "The technical milestones were accomplished on track. All of the things you look at from a report-card perspective, we did."
Lockheed's biggest revenue generator, the aeronautics division, had a sales drop of less than 1 percent, to $2.8 billion, as it retires the F-16 aircraft and replaces it with newer models such as the F-35 and F-22 fighter jets.
Three other business segments had sales increases. Information systems and global services was up 17 percent, to $2.5 billion. Electronic systems, which makes missiles, radar systems and other equipment, was up 11 percent, to $2.79 billion. Space systems, which makes satellites and missiles for submarines, was up 5 percent, to $1.88 billion.
Analysts said the company's earnings per share were boosted in part by a buyback of 11.3 million shares during the quarter, which cost Lockheed $1.2 billion.
Defense contractors have greatly benefited from increases in military spending and large multiyear Pentagon contracts.
Lockheed holds some of the biggest defense contracts, including a deal for the Joint Strike Fighter, a program to build F-35 fighter jets.
The program is being closely watched because the next presidential administration could have different defense priorities, analysts said. Lockheed's F-35 program has come under criticism because its costs are expected to rise to nearly $300 billion over its lifetime, but Lockheed said the costs are leveling out and have even gone down slightly, 0.03 percent, to $298 billion, according to a recent Pentagon report.
The company, like other defense contractors, has been largely insulated from the economic troubles other industries have faced. Lower interest rates have, however, decreased the amount Lockheed is making on its $3 billion in cash holdings.
The company raised its outlook for 2008 by 10 cents a share.
"One of the reasons that I could only increase the earnings [forecast] a dime this quarter is that the cash I've got sitting on the balance sheet is making less interest," Tanner said.