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Did Lockheed Stay on Target This Quarter?

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All analysts in the defense sector can talk about these days is the looming fiscal cliff and the sequestration it hangs over the heads of defense contractors. The leaders in this field can't help what the government does or doesn't do -- but they can still continue to succeed as great companies, and top-selling U.S. contractor Lockheed Martin (NYSE: LMT  ) is indeed a quality corporation. Let's see whether this company stayed on target for the third quarter.

Shock and awe
Lockheed had a lot to live up to this quarter after smashing earnings estimates in Q2. Analysts had projected somewhat of a slide from the second quarter on both EPS and sales, which wasn't necessarily a bad thing after the contractor managed two straight quarters of solid revenue growth and eight consecutive quarters  of consistent earnings. True to the projections, Lockheed's numbers did, in fact, retreat slightly in this quarter from Q2.

That sure didn't stop the company from blowing the doors  off of the estimates. While revenues decreased, Lockheed still looked sharp, with a reported $11.9 billion for the quarter. Although last year's third-quarter result had come in at $12.1 billion, analysts had projected the company to rake in only $11.2 billion of sales today. On that note, Lockheed defied analysts to extend a bonus to shareholders.

On net earnings, however, the company wouldn't retreat from 2011's figures. Lockheed reported Q3 net profit of $727 million, a gain of $27 million from Q3 2011. In EPS terms, the company's reported earnings per share of $2.21 pounded analyst estimates of $1.85 per share and picked up $0.11 over last year's figure.

The major success in topping expectations and growing margins prompted the company  to raise its full-year forecast. Despite the doom-and-gloom forecasts recently about the disastrous effects of budget cuts, Lockheed's numbers show that it's still operating with the same quality business model that has succeeded brilliantly so far.

Getting defensive
Lockheed led a good day all around from the defense industry, which reported earnings from some of the biggest names  in the industry. Boeing's (NYSE: BA  ) defense division also beat estimates in its report, while defense rival Northrop Grumman (NYSE: NOC  ) similarly topped projections. In a win for Lockheed's competitive streak, however, General Dynamics (NYSE: GD  ) missed on earnings. Still, positive news all around the defense sector should help Lockheed shareholders sleep better at night knowing the major contractors are still flying strong.

Shareholders rejoiced as the company's stock hit 52-week highs today. Positive news on the international front also  helped -- 25% of orders for the quarter came from international sources, according to COO Chris Kubasik, who is set to take over as  CEO in 2013. With this, Lockheed looks like it's making the right moves to hedge against potential sequestration looming over the industry from the governmental fiscal cliff.

Looking to the future
Lockheed's looking strong in overcoming fears of the future, doing everything right to sustain its place as the top American defense contractor. With today's report of gains in space  and electronics systems segments, Lockheed's investing in success for the industries it will need to dominate tomorrow. Investors in the defense sector can't find a much steadier player than this experienced giant, and today's great earnings news only show just how strong Lockheed's future can be.

Lockheed's a true American company through and through, but its international expansion shows that it understands the value of succeeding globally. Fortunately, profiting from our increasingly global economy can be as easy as investing in your own backyard. Our free report "3 American Companies Set to Dominate the World" shows you just the right picks you need to invest with the world's best. Click here to get your free copy before it's gone.

Dan Carroll has no positions in the stocks mentioned above. The Motley Fool owns shares of General Dynamics, Lockheed Martin, and Northrop Grumman. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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10/21/2016 4:02 PM
LMT $230.52 Down -1.31 -0.57%
Lockheed Martin CAPS Rating: ****
BA $135.63 Down -0.21 -0.15%
Boeing CAPS Rating: ****
GD $150.18 Down -0.53 -0.35%
General Dynamics CAPS Rating: ****
NOC $215.86 Down -1.50 -0.69%
Northrop Grumman CAPS Rating: ****