Lockheed earnings dip 3.9% for quarter But improved margins boost per-share profit


October 21, 1998|By Greg Schneider | Greg Schneider,SUN STAFF

Net earnings were down 3.9 percent but profit margins were up as Lockheed Martin Corp. reported its third straight quarter of unspectacular financial results yesterday.

The Bethesda-based defense and aerospace company posted $318 million in net earnings on sales of $6.3 billion for the third quarter, down from earnings of $331 million on $6.6 billion in sales for the same portion of last year.

Thanks to healthier profit margins and less outstanding stock, though, fully diluted earnings per share rose to $1.67 from the $1.51 reported for last year's third quarter.

"Their year is like everyone else's year in the defense industry: Everyone is missing sales forecasts, but all are showing better profit margins and generally delivering consensus earnings across the board," said Peter Aseritis, an industry analyst with CS First Boston.

Also like other defense companies, Lockheed Martin expects a big fourth quarter to even out the year. For instance, the company has delivered only four C-130J transport planes so far this year but expects to ship 26 during the last three months, Aseritis said.

"Results year-to-date are consistent with expectations," said Vance Coffman, Lockheed Martin's chairman and chief executive officer, who also pointed out that the company generated a whopping $650 million in free cash flow during the third quarter -- beyond most analysts' expectations.

"We also continue to win new business at an outstanding rate, reflecting our ongoing concentration on performance and costs," Coffman said.

Most industry experts were satisfied with the showing for the quarter, and the earnings per share met the consensus of analysts surveyed by First Call Corp. "It came in right where we expected," said Paul Nisbet of JSA Research Inc.

Lockheed Martin divested businesses last year with total annual sales of about $2 billion, including the Aerostructures facility in Middle River. Adjusting results to reflect those changes, revenue for the third quarter would have risen 3.3 percent compared with the year-ago period, it said.

The Middle River sale was part of a transaction with General Electric Co. that allowed Lockheed Martin to retire the equivalent of 29 million shares of common stock, boosting this year's earnings per share.

But the effects of that deal and other steps to enhance efficiency cannot make up for soft sales over the long term, Aseritis said. "The good news is defense spending should turn up reasonably RTC nicely in the next few years," he said.

Lockheed Martin stock fell 37.5 cents yesterday to close at $108.125 per share.

Pub Date: 10/21/98

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