Defense contractor Lockheed Martin (LMT), which makes weapons including F-16 fighter jets and Trident missiles, posted higher fourth-quarter earnings of $827 million, or $2.17 per share, topping Wall Street's expectations. The results surpassed the $823 million, or $2.05 per share, the company earned a year ago and beat estimates of $1.99 per share. The earnings per share results, however, were boosted by a share buyback.Lockheed said that earnings in 2009 included higher pension expenses that offset a 13% sales growth and larger profits from cargo plane and jet fighter sales. Sales were $12.52 billion, better than the expected $12.47 billion.
F-35 Behind Schedule
In its aeronautics division, net sales increased by 13% for the quarter, primarily due to higher volume on the C-130 Hercules transport planes, the F-35 and F-16 fighter jets. These offset lower volume on F-22 and other combat aircraft programs. Meanwhile, the development of the F-35 jet fighter, is about six months behind the schedule set five years ago, but the company expects that delay can be made up next year, Dow Jones reported.
In electronic systems, sales increased by 12% for the quarter, primarily due to growth on tactical missile programs among other programs. These were partially offset by a decline in integrated defense technologies. Starting this quarter, Lockheed Martin realigned the business to include its ground vehicles line of business.
In its information systems and global services unit, net sales increased by 2% for the quarter as sales increases in Defense and Civil partially were offset by slight declines in Intelligence. Lockheed Martin expects improved deliveries in this segment.
'Our Achievements Were Numerous'
In space systems, sales increased by 28% for the quarter as higher volume in government satellite activities among others more than offset lower volume on defensive missile programs.
"Our achievements in 2009 were numerous and significant while operating in a dynamic business environment," said Lockheed Martin Chairman and CEO Bob Stevens. "As we move into a new decade, we will continue to meet our customers' most important challenges by offering the innovative products, superior services and strong performance that have made Lockheed Martin the world's foremost provider of global security solutions."
This is an interesting statement from the CEO of a company for which only 15% of its business is international, while the U.S. Department of Defense accounts for 58% of it. It is this large portion of Pentagon sales that is of concern to investors, as the U.S. defense budget may grow more moderately in the coming years.
Pulling Troops From Iraq
While President Obama said Wednesday in his State of the Union Address he will not cut the budget, he did say he wants to pull combat troops out of Iraq by August. And while the focus on Afghanistan increases, it may not be enough to offset a likely stagnant budget. Next week will offer more information as the 2011 budget is revealed.
Regardless, the defense contractor said it is raising its 2010 earnings-per-share guidance to a range of $7.15 to $7.35, but even the raised outlook was slightly below Wall Street estimates of $7.41. Lockheed also guided revenue to a range of $46.25 billion to $47.25 billion, only an 8% increase over 2009. This is not much different than other contractors reporting so far such as General Dynamics Corp. (GD), which also predicted 2010 earnings below analysts' estimates.
Lockheed Martin shares decline about 2.2% in Thursday trading. Over the past year, its shares lost 8.7% of their value, underperforming their peers and overall market.
Investing in Startups
The lucrative and risky world of startups.View Course »