Recessions are
tough on business.
They're even
tougher on employees.
But not at
Lockheed Martin (NYSE: LMT). Lockheed's stock
got perfectly pounded after earnings, thrown for a 6.5% loss
(and down nearly another 3% yesterday) despite reporting:
Pentagon budget crunch.
Lockheed's bottom line crushed Wall Street's projections
-- so why is the stock losing altitude?
No good deed goes unpunished
Two words: Profits and pensions. In recent years, we've
seen traditional or cash balance corporate pension plans go
the way of the dodo at hi-profile corporate names like
Wells Fargo (NYSE: WFC),
Motorola (NYSE: MOT), and
FedEx (NYSE: FDX). Across America, companies
have moved to freeze, slash contributions to, and even wash
their hands entirely of their pension obligations. And as I
wrote back in July, the mayhem isn't even close to being
finished. According to
Bank of America unit Merrill Lynch, dozens of
America's industrial titans face pension funding shortfalls
as this year's stock market collapse
torpedoes pension fund returns, including
Dow Chemical (NYSE: DOW),
U.S. Steel (NYSE: X),
ExxonMobil (NYSE: XOM). It seems no one is
safe.
But while others fret, Lockheed is doing something about
the problem -- and getting punished for it. Part and parcel
of the earnings warning that Lockheed issued is the company's
plan to shore up its pension fund. Lockheed will inject $1
billion into its fund this year, and a further $1.4 billion
in 2010. Combined, the twin injections will eat up quite a
bit of Lockheed's yearly cash production.
Is it worth it?
That's the real question, Fools. Wall Street doesn't
seem thrilled with the idea, but personally, if I were a
Lockheed Martin employee, I'd be feeling pretty darn proud of
my company today. As other
corporates shirk or slashtheir pension obligations,
Lockheed's paying up in full -- and I'd argue, making a wise
investment in employee satisfaction.
When you consider that even after
the market's rebound, stocks are trading for some 30% to
their pre-Crash highs, an investment into the pension fund
today isn't a bad time to patch a hole in Lockheed's pension
shortfall. Personally, I'd rather have a company contribute
now and have that money grow from these lessened levels.
It just might secure the fund's future while other
companies with less courage only delay the inevitable
shareholder pains. Then again, at the tail end of last year
Lockheed had arguably the largest pension headache of any
American company, so maybe this is just the start of
Lockheed's pension pain.
This article was originally published as
Pension Woes Lay Lockheed Lowon
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