Lockheed's profit rises 6.4% despite sales drop Planes, space vehicles, missiles carry load

October 22, 1997|By Greg Schneider | Greg Schneider,SUN STAFF

Lockheed Martin Corp. rode aircraft, space vehicles and missiles to a 6.4 percent increase in net income for the third quarter compared with the same period last year, the company said yesterday.

Earnings of $331 million for the quarter beat the $311 million reported in 1996, even as overall sales declined 6 percent -- to $6.6 billion from about $7 billion.

The company blamed the drop in sales on a series of divestitures completed in the past year. Without the divestitures, sales would have increased 1 percent, the company said.

A solid showing from the Bethesda company's aeronautics business and its space and strategic missiles segment boosted primary earnings per share by 10 percent, to $1.70 for the third quarter, compared with $1.55 for same part of 1996.

Lockheed Martin is one of the few companies to also report earnings per share on a fully diluted basis, which calculates all convertible securities as common shares. Figured that way, earnings amounted to $1.51 per share -- on track with what most analysts had expected.

"They've brought expectations very close to what happened here. It was not a bad quarter, not a great quarter," said Roger Threlfall, an analyst with J. P. Morgan Securities.

He said the company is in a "transitional period" because of the recent divestitures, which included spinning off several electronics and communications segments into a new entity called L3 Communications Corp., and spinning off Martin Marietta Materials Inc. to shareholders.

The L3 move caused net sales in Lockheed Martin's information and services segment to stay flat and earnings before taxes to fall by 46 percent compared to last year.

Dropping the materials business caused the corporation's energy-related sales to plummet 79 percent compared to the same part of 1996, though pretax profits in that area fell only 12 percent.

Aircraft sales fell 12 percent from the third quarter of 1996, to $1.294 billion from $1.477 billion, but pretax profit rose to $152 million from $135 million. A boost in sales of F-16 fighter planes offset a lag in orders for C-130 transport planes.

Profit margins also looked good in the space and strategic missiles segment, where sales rose 4 percent -- to $1.944 billion from $1.866 billion -- and profit climbed 26 percent, to $299 million from $237 million.

"We continue to grow sales organically, margins demonstrate steady improvement and our customers are benefiting from savings generated by our consolidation efforts," said Vance D. Coffman, the chief executive officer.

One area that seemed stagnant during the quarter was electronics, where sales dropped 6 percent from last year's third quarter -- to $1.699 billion from $1.803 billion -- and profit dropped 5 percent, to $175 million from $184 million.

That segment could benefit from the company's planned acquisition of Northrop Grumman Corp., which Coffman said was on target to close during the first quarter of next year.

Threlfall, the Morgan analyst, warned that the Northrop Grumman deal "is more of a long-term strategic fit as opposed to a short-term earnings boost." Still, he said, there is no reason to be concerned about electronics, which maintained healthy profit margins.

Lockheed Martin stock responded to the earnings report by falling 75 cents to close at $103.75.

Pub Date: 10/22/97

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.