Lockheed Martin Corp., the nation's largest defense contractor, said yesterday that its third-quarter earnings grew 39 percent, while another large Pentagon contractor, Northrop Grumman Corp., reported a 5 percent increase in its profit for the period after being hurt by hurricane damage to its Gulf Coast shipyards.
Bethesda-based Lockheed, which has 15,000 employees in the region, reported gains across the board in sales and profit in its aircraft manufacturing, space and information technology divisions. Profit for the quarter, which ended Sept. 30, was $427 million (96 cents a share), compared with $307 million (69 cents) in the same period last year. Sales were $9.2 billion, up 9 percent from $8.4 billion.
Chief Financial Officer Christopher E. Kubasik said in a conference call with stock market analysts that "although we are generally perceived as a pure play defense contractor," more than 40 percent of Lockheed's sales are outside the Defense Department. About 22 percent of revenue comes from civilian government agencies, he said. "We're a lot more diverse than many realize."
He cited the information technology unit as "a growth engine" for the company, accounting for half of total sales and more than half the profit. In response to a question about the effect of any troop withdrawals from Iraq, he said Lockheed has little revenue at stake there and might even benefit if some of the billions of dollars being spent on the war were available to "take some pressure off the overall budget." That would allow other programs, such as the company's high-profile and high-cost F/A-22 and Joint Strike Fighter aircraft, "to possibly maintain their current budget and growth program," he said.
Kubasik called the company's recent winning of a $200 million surveillance contract by the New York City subway system an example of growth in an era of flat defense budgets. "I would hope that this is the first of many as we continue to grow and evolve our homeland security line of business," he said.
Northrop Grumman of Los Angeles, meanwhile, reported a profit of $293 million (81 cents) in the three months ended Sept. 30, up from $278 million (76 cents a share) in the same period last year. Its sales were unchanged at $7.4 billion.
Chief executive Ronald D. Sugar told analysts in a conference call that damage by Hurricane Katrina at Northrop's shipyards in Pascagoula, Miss., and New Orleans cost the company 30 cents per share in the quarter.
He said that work had resumed on 11 ships at the two yards and that the company was arranging to provide temporary housing for more than 1,000 displaced employees.
Sugar, whose company has about 19,000 workers in the Washington area, said he could not predict the direction of future defense budgets. "The fundamental underlying view I have is that the set of challenges that are facing the nation's military worldwide are increasing in severity, not decreasing, and despite the pressures we have on budget, deficit and everything else, I think the nation is going to have to step up to that," he said.
Lockheed's stock closed yesterday at $61.23, down $1.12 per share. Northrop Grumman's shares closed at $52.92, down 98 cents.