So Lockheed Martin (NYSE:LMT) posts blockbuster first-quarter results with an earnings-per-share increase of 61% to $1.34, yet its stock sells off. What gives? In light of its sharp run-up from the upper-$50 range since November, the nervousness appears to be based on concerns over future budget cuts in federal defense spending. But going by this quarter's performance alone, there seems to be plenty to savor.

In a wartime environment, defense contractors are natural beneficiaries, as evidenced by Lockheed Martin's 8.5% year-over-year revenue increase, a figure that topped consensus analyst estimates. Its Systems and Information Technology group grew sales by 13%, with multiple platforms contributing to the increase, including its air defense projects. The Space Systems group also had a strong quarter, with revenues higher by 18% on the strength of satellites. The Aeronautics group, on the other hand, suffered a decline in revenues as a result of weaker cargo aircraft sales, which offset strength in combat aircraft sales like the F-22 Raptor.

Beyond solid top-line growth, Lockheed Martin managed to improve operating margins to 10.1%, up from 9% in the year-ago period. The company saw greater profitability in all three groups, including Aeronautics, as the more profitable combat aircraft offset losses from its transport craft.

In a nutshell, Lockheed Martin achieved a solid first quarter, though it must be noted that its 61% EPS growth isn't purely a result of stellar operating performance, since the company did benefit from two large one-time gains that kicked in a $0.22 bump. Still, it was an impressive quarter, and what may be even more encouraging is the company's highlight of future growth initiatives.

Lockheed Martin's quarterly earnings conference call offered some useful insights into the broad range of products it's working on, including the FBI's Sentinel program, THAAD and JASM missiles, and the Littoral Combat Ship. The breadth of its future product offerings is an encouraging sign. With 60% of the company's revenue coming from traditional sources -- Army, Navy, Air Force, and Marines -- the diversification of products will increase the other 40% that stems from intelligence, civil, Homeland Security, and international customers.

The concern for investors, again, is that the increased spending by the U.S. government in recent years could turn into a drought. And these concerns are not unfounded. The history of defense spending certainly shows peak purchasing periods followed by dry spells. But given the organic growth and acquisition efforts the company has highlighted, there is little evidence that business will be slowing down anytime soon.

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Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.