Lockheed Martin 2Q profit falls 10 percent

AP News
Posted: Jul 26, 2011 10:06 AM
Lockheed Martin 2Q profit falls 10 percent

Lockheed Martin Corp.'s profit slipped 10 percent in the second quarter as the aerospace and defense contractor dealt with severance pay matters and increased pension costs.

But the company's results managed to top analysts' expectations, and its revenue climbed despite pressure from reduced government spending.

Lockheed also raised its 2011 earnings guidance to a range above Wall Street's forecast. The Bethesda, Md., company lifted the low end of its revenue guidance, but reduced the high end of that outlook.

Lockheed's stock rose $1.05 to $80.35 in morning trading Tuesday.

For the quarter ended June 26, Lockheed reported net income of $742 million, or $2.14 per share, down from $824 million, or $2.22 per share, a year earlier.

A job cuts-related charge, which is tied to its aeronautics and space systems units, lowered earnings by 18 cents per share.

In June Lockheed said it planned to cut 1,200 employees in its space systems equipment division. Two weeks later the company said it planned to cut 1,500 additional jobs within its airplane-making business. Lockheed said Tuesday that the aeronautics cuts are being made in part because of lower government spending.

Lump-sum severance payments are expected to be made during the second half of the year, but Lockheed said that it expects to make back a "substantial amount" of the severance charge from future sales of products and services to the government and other customers.

The job reduction news continued last week when Lockheed announced a voluntary layoff program for about 6,500 U.S.-based employees. The program will be offered to salaried employees in the corporate headquarters and enterprise business services organizations.

Lockheed, designs, manufacturers and services high-tech systems used in defense, space, intelligence and security applications. Its products include satellites, aircraft, weapons and software. The company employs about 126,000 people worldwide.

Lockheed said pension costs reduced its quarterly earnings by 41 cents per share. The current quarter's results also included a tax benefit of 26 cents per share that somewhat offset the severance charge and pension costs.

Analysts surveyed by FactSet predicted adjusted earnings of $1.94 per share.

"During the second quarter, we had strong execution across the company even while implementing difficult measures to rightsize our business for an environment that remains challenging," Chairman and CEO Bob Stevens said in a statement.

Quarterly revenue rose 2 percent to $11.55 billion from $11.28 billion on increased revenue at the company's aeronautics and electronic systems segments.

The performance beat Wall Street's revenue estimate of $11.45 billion.

Lockheed said its aeronautics revenue improved partly because of more work on F-35 jet contracts, while the electronic systems unit was partially helped by increased volume on a variety of air defense programs and more deliveries on tactical missile programs.

The company reported that its backlog was at $77.3 million at quarter's end. This compares with a backlog of $78.4 million as of Dec. 31, 2010.

Lockheed now foresees 2011 earnings of $7.35 to $7.55 per share on revenue of $46 billion to $47 billion. The company's previous guidance was for earnings between $6.95 and $7.25 per share, with revenue in a range of $45.75 billion to $47.25 billion.

Analysts expect full-year earnings of $7.27 per share on revenue of $46.68 billion.