2Q profit more than doubles at Lockheed

Huge F-35 contract starting to pay off

July 19, 2002|By Robert Little | Robert Little,SUN STAFF

Lockheed Martin Corp. reported yesterday a second-quarter profit of $339 million, more than double that of the year-earlier quarter, as it began to reap the rewards of the largest defense contract ever awarded.

Initial returns from Lockheed Martin's contract to develop and build the new F-35 Joint Strike Fighter, along with other military aircraft orders and a $90 million tax credit, drove earnings per share to 75 cents in the quarter, up from 33 cents per share in the second quarter of 2001.

Sales in the quarter rose 11 percent to $6.3 billion, from $5.7 billion last year.

The report was the latest in a series of strong returns posted within the defense industry, which is enjoying an increase in federal spending on weapons and homeland security projects. This week, Northrop Grumman Corp. and General Dynamics Corp. posted stronger-than-expected earnings.

Besides being awarded the F-35 contract, which could be worth $200 billion or more, Lockheed Martin has landed a string of lucrative deals in recent months, including a $1 billion air traffic control upgrade for the Federal Aviation Administration and part of a $15 billion modernization of the Coast Guard.

The Bethesda-based contractor increased its projected sales for the year to as much as $26 billion, and raised its outlook for annual earnings to more than $2.50 per share. It had been predicting no more than $25.8 billion in sales and earnings of $2.45 or more.

"It's an exceptional quarter all the way around," said David Gremmels, a defense analyst for Thomas Weisel Partners LLC who rates Lockheed Martin shares a "strong buy."

"They're very close to being a pure play in government spending so they're not affected by commercial markets that have fallen off," Gremmels said. "Their balance sheet is improving; they're benefiting from increased spending on national defense and security; they're just very, very strong all the way around."

Sales at Lockheed Martin's aeronautics business rose 46 percent during the quarter, as it delivered five F-16 fighters and three C-130J transports and performed more work on F-35 and F-22 combat aircraft than a year earlier.

The company has largely shed its global telecommunications business, an underperforming unit that executives abandoned late last year. That business accounted for a $12 million loss during the quarter, one of the few blemishes on Lockheed Martin's books.

Lockheed Martin shares rose 54 cents to $60.54 on the New York Stock Exchange yesterday. The shares have risen more than 50 percent since Sept. 11.

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