Lockheed Martin Corp. posted a 13 percent increase in second-quarter earnings Tuesday, beating Wall Street expectations and prompting the company to raise its yearly outlook as it made up a drop in fighter jet sales with strength in its other business units.
Shares of Lockheed, the nation's largest defense contractor, rose $2.29, or 2.3 percent, to close at $103.88.
Lockheed said it earned $882 million, or $2.15 per share, in the second quarter, up from $778 million, or $1.82 per share in the same quarter last year.
The second quarter includes a 14 cent one-time gain from the settlement of a long running dispute with the federal government over land sales in California.
Stripping out one-time items, the company posted an adjusted profit of $2.01 per share.
Revenue grew 4 percent to $11 billion from $10.65 billion a year ago.
Analysts polled by Thomson Financial expected a more modest adjusted profit of $1.88 per share on $10.86 billion in revenue.
Lockheed now expects to earn between $7.45 per share and $7.60 per share and revenue of between $41.9 billion and $42.9 billion in 2008, citing the land settlement and higher projected profits across its businesses. In April, the company had forecast yearly results of between $7.15 per share and $7.35 per share on revenue of between $41.8 billion and $42.8 billion.
Analysts expect $7.47 per share on $42.8 billion in revenue for the year.
Bruce Tanner, the company's chief financial officer, said the company boosted its outlook based on expected strength in its areas such as missile defense work and new orders for the F-16 fighter jet from countries like Morocco that will extend the manufacturing line of the roughly 30-year-old jet program.
"We are seeing some very strong performance," Tanner said in an interview.
Lockheed is best known for fighter jets like the F-35, which will eventually be used by the Marines, Air Force, Navy and several foreign countries. However, the company said sales will likely dip in the aeronautics sector until next year as it shifts production to the newer F-35 fighter.
Lockheed had a big win during the quarter when the Pentagon awarded it a $3.57 billion contract to build new GPS satellites. But some of its big programs are facing schedule and cost overruns, and a decision on whether to continue building the expensive F-22 fighter probably won't be made until the next president takes office.
Analysts said they expected defense stocks to moderate toward the end of the year due to uncertainty over the election, but that Lockheed's strong results and new forecast are expected to help buffer it against the changes.
"The company remains our best positive earnings revision story," said Myles Walton of Oppenheimer & Co.
The company's aeronautics division saw sales slide in the second quarter, dropping 8 percent to $2.9 billion. The electronic systems unit, which makes missile technology and other equipment, rose 6 percent to $3.1 billion.
Information systems and global services, which includes the IT unit, posted the biggest rise, up 13 percent to $2.9 billion. Space systems saw sales grow 6 percent to $2.2 billion.
For the first six months of 2008, Lockheed earned $1.6 billion, or $3.90 per share, on sales of $21 billion. That is up from a profit of $1.47 billion, or $3.42 a share, on revenue of $19.93 billion a year earlier.
(This version CORRECTS Corrects 16th graf to say second quarter sted of fourth quarter)
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