Retooled Martin Marietta stirs analysts' optimism

January 23, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Wall Street had its first up-close look at the new, bigger Martin Marietta Corp. yesterday and liked what it saw, although with some reservations about how the company will perform over the coming year.

Speaking before Wall Street analysts, Martin Marietta Chairman Norman Augustine was able to give few new details about the company's recent $3 billion acquisition of General Electric Co.'s aerospace division, a purchase that makes Martin Marietta the nation's biggest defense contractor.

Mr. Augustine's presentation came a day after the Bethesda-based company reported a 72 percent jump in fourth-quarter earnings and a 10 percent boost in profits for last year.

Due to declining defense spending, Martin Marietta will have to pay off the purchase with fewer revenues than it might have had earlier. Last year, Martin Marietta had $6 billion in revenues and GE's aerospace unit had $5 billion. Combined, however, Mr. Augustine said they would have about $10 billion.

"Both companies individually (are) . . . projecting significant sales declines for 1993," Mr. Augustine said.

While the company might have to close some facilities, Mr. Augustine said he could give no specifics. But the company is not contemplating sales of any assets, he said.

One of the company's strengths would be research and development, which Mr. Augustine said would top $4 billion this year.

Although an antitrust investigation by the government related to the new acquisition, a still-unreleased proxy statement and government secrecy laws did not allow many new figures to be released, Peter Aseritis, a defense industry analyst for First Boston Corp., said analysts generally remained upbeat.

"I think the general consensus is bullish on Martin Marietta. They seem to have a real powerhouse built," Mr. Aseritis said.

One problem revealed yesterday that could hinder the company initially, Mr. Aseritis said, was that the GE division will not be fully integrated until April, about a month behind schedule. This, and higher-than-expected fees to complete the deal, would deprive the company of some expected revenues.

As a result, Mr. Aseritis has lowered his earnings estimate for 1993 from $8.40 a share to $7.85. Once

the teething problems are behind it, he expects earnings to climb to $8.95 a share, a bit under his initial forecast of $9.50.

Martin Marietta's stock closed yesterday at $69.50, down $2.

Wolfgang Demisch of UBS Securities Inc., unlike most analysts, rates Martin Marietta's stock a hold rather than a buy.

"For the near term, it seems they have to work through the challenges on their balance sheet," Mr. Demisch said.

Although the company does face a declining domestic defense market, Anthony Ginsberg of Fourteen Research Co. said investors were sure that Martin Marietta would prosper. "If they don't survive, no one will," he said.

Reuters contributed to this article.

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