Lockheed predicts profit increase

Stock price climbs almost 8% on news

January 26, 2001|By Robert Little | Robert Little,SUN STAFF

Shares of Lockheed Martin Corp. surged nearly 8 percent yesterday after the defense giant announced that it expects its profit to increase 25 percent to 30 percent by the end of the year, more than had been expected.

The Bethesda-based corporation attributed its rosier forecasts mostly to lower anticipated taxes, interest expenses and retirement expenses, not to any boost from its core defense products such as satellites, military aircraft and weapons systems.

The news impressed traders on Wall Street, where most analysts say Lockheed Martin has recovered from its earnings slump two years ago.

Lockheed Martin's shares rose $2.51 to close at $34.51 on the New York Stock Exchange, a 7.84 percent increase.

The gains came despite another announcement from the company yesterday that its fourth-quarter earnings fell 70 percent, to $89 million, from $293 million in the fourth quarter of 1999. Analysts were expecting an even sharper decline.

"They've obviously been getting their act together," said Paul H. Nisbet, an aerospace analyst for JSA Research Inc., which recently raised its rating on Lockheed Martin's stock from "hold" to "buy."

"They know what's going on financially, and within their markets, and they've tightened things up considerably. Management has made a big, big difference."

Last year was a busy one for the nation's largest defense contractor as it continued to reorganize and shrink in response to a spate of operational problems and profit scares in 1998 and 1999.

In the fourth quarter of last year, Lockheed Martin closed the $1.67 billion sale of its military electronics division, completed a $770 million merger with Comsat Corp. and bought back $1.9 billion in debt.

The company is awaiting the fate of several defense products that are under review in Congress - such as the F-22 Raptor and the proposed Joint Strike Fighter. And officials said yesterday that they expect little growth in the commercial satellite and rocket businesses.

But sales for most of its divisions were up during the last quarter of last year, fueled by foreign sales of the F-16 fighter jet, contracts for land surveillance systems and a new attack-submarine program.

The company earned 21 cents a share in the fourth quarter, down from 76 cents a share a year earlier. Sales rose to $7.6 billion from $7 billion in 1999.

For the full year, Lockheed Martin posted a net loss of $519 million, attributed almost entirely to one-time costs associated with its restructuring. Without those charges, earnings for the year were $1.07 a share, 2 cents higher than predicted but down from $1.50 in 1999.

The company had forecast an earnings increase of 20 percent this year but revised that estimate yesterday to 25 percent to 30 percent.

"We are delighted with the accomplishments that Lockheed Martin achieved in 2000," said Chairman and Chief Executive Officer Vance Coffman. "We exceeded all financial goals."

The aerospace sector has performed well in recent months, with companies such as Boeing Co., General Dynamics Corp., Raytheon Co. and Northrop Grumman Corp. reporting strong earnings. Lockheed Martin's share price has more than doubled since March.

"A lot of the companies in the sector are doing well, and in an economic environment that seems to be slipping," Nisbet said. "I think people are taking notice of the solid fundamentals."

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