Investors were excited about Lockheed Martin's (NYSE:LMT) second-quarter results, reported this morning, even though the company posted a drop in sales. The stock was up more than 2.5% around 1 p.m. EDT.

Net sales fell 1% in the quarter to $11.3 billion, but net income rose 3.5% to $889 million, or $2.76 per share. The good news was that cash flow and earnings guidance was increased for the full year. Management now expects operating profit of $5.375 billion to $5.525 billion, earnings of $10.85 to $11.15 per share, and cash flow from operations of over $4.8 billion.  

Part of the gain for the second quarter and full-year outlook was due to pension accounting, which can sometimes help and sometimes hurt earnings over the short term. In the second quarter. Lockheed Martin posted an $85 million pension profit, versus a $120 million expense a year ago, which makes up more than the entire rise in earnings. Long term, management is transitioning more employees to a defined contribution plan, which will keep costs fairly level quarter to quarter.

At the end of the day, the F-35 program saved what could have been a much worse quarter, pushing aeronautics sales up 13% to $3.9 billion. Sales were down in the rest of the company, and with U.S. government spending still under pressure, I think revenue will struggle for the foreseeable future. Shares are trading at 15 times earnings, which is a high price for a company that isn't growing at all at the moment.