Lockheed Martin Corp posted better-than-expected quarterly profit, aided by a lower tax rate yesterday, but the defense contractor forecast 2010 earnings and revenue below Wall Street estimates, sending its shares down 6 %.
“Wall Street is beginning to get the true outlook” for Lockheed as President Barack Obama slows defense spending growth and cuts some weapons programs, said Paul Nisbet, an analyst with JSA Research.
“The industry is in for a tough few years under Obama,” Nisbet added.
This year, US cancellations of defense programs such as the VH-71 presidential helicopter and the scale-back of some missile programs have hurt Lockheed’s backlog and forced it to cut jobs in some divisions.
Pentagon terminations have “resulted in a loss of revenue and profitability that cannot be made up in the near term,” Lockheed Chief Executive Robert Stevens said during a conference call.
He added that Lockheed was also beginning to see the impact of the wind-down of its F-22 Raptor warplane, due to end production in 2012, and said expanding margins could be difficult in coming years as lower-margin work accounts for more of the company’s backlog.
Forecast below consensus
For next year, Lockheed forecast per-share profit in the range of $7.05 to 7.25, down from its 2009 profit forecast of $7.40 to $7.60. Analysts had expected profit of $7.89 for 2010, according to Thomson Reuters I/B/E/S.
Revenue of $46.3 billion (R341 billion) to $47.3 billion (R349 billion) is expected for 2010, compared with analysts’ average estimate of $47.6 billion (R351 billion).
Lockheed, the top supplier to the Pentagon, promoted Christopher Kubasik to president and chief operating officer, effective Jan. 1, as part of a reorganization designed to help it improve operations and deliver products at lower cost.
Net earnings came to $797 million (R5881 million) or $2.07 a diluted share, for the third quarter, up 2 % from $782 million (R5771 million), or $1.92 a share, a year earlier.
The company said the latest results include a pension adjustment and a tax benefit from the resolution of a US Internal Revenue Service examination that together decreased per-share profit 4 cents a share.
Analysts had expected profit of $1.83 a share for the quarter, according to Thomson Reuters I/B/E/S. Third-quarter revenue rose about 5 % to $11.06 billion (R81 billion, but was short of the $11.40 billion (R84 billion) expected by analysts.
Lockheed shares were down $4.58, or 6 %, at $72.41 in afternoon New York Stock Exchange trading. Rival Northrop Grumman Corp was off $1.56, or 3 %, at $49.63 and General Dynamics Corp fell $1.38, or 2 %, to $67.32.
Pic: Lockheed Martin logo