Lockheed Martin Corp. reported a 36 percent increase in third-quarter profit yesterday as sales of fighter jets and other military hardware soared.
Despite the gains, Lockheed Martin's stock slid 4.2 percent amid worries about $300 million in potential losses from the company's pension fund, which has suffered from the declines of the rest of the stock market.
"Operationally, they're doing fine," said Paul H. Nisbet, an aerospace analyst for JSA Research Inc. who maintains a "buy" rating on Lockheed Martin's stock. "It's just the pension account that's going to be trouble."
Most large defense contractors have reported strong sales growth in the past year as the Pentagon and the rest of the federal government focus on fighting terrorism and preparing for a possible war. But the increases at Lockheed Martin exceeded the expectations of many analysts.
The Bethesda-based company had net income of $290 million, or 64 cents a share, during the three months that ended Sept. 30, compared with $213 million, or 50 cents a share, one year ago.
Quarterly sales increased in each of the company's four major divisions, rising a total of 5 percent to $6.5 billion, from $6.2 billion in 2001. Sales this year are 13 percent higher than they were last year, and executives raised their estimate for the full year yesterday to $26 billion.
The largest gain came from Lockheed Martin's aeronautics unit, which makes the F/A-22 Raptor, the F-16 Fighting Falcon and the F-35 Joint Strike Fighter. Higher volume for each of those fighter jet assembly lines propelled the division's quarterly sales up 15 percent to $1.67 billion.
Other government programs also fared well, including work on C-5 cargo airplanes and defense information technology programs. The company won a $550 million contract during the quarter from the U.S. Postal Service to build an automated package-processing system.
"We're pleased," Chief Financial Officer Christopher E. Kubasik said during a conference call with analysts. "We grew sales, earnings and cash during the third quarter."
The company could not increase its pension fund, which is expected to incur $200 million to $300 million in unanticipated costs next year, he said. Lockheed can recover most of its additional pension costs from the government, but yesterday's projections were higher than anticipated and seemed to spook investors.
Shares of Lockheed Martin stock, down nearly 6 percent at midday, closed at $56.63 yesterday on the New York Stock Exchange, down $2.47.