The world's largest stand-alone defense contractor,
Lockheed Martin Corporation
), posted third quarter 2013 earnings of $2.57 per share,
comfortably surpassing the Zacks Consensus Estimate of $2.26 by
13.7%. Earnings in the reported quarter also surged almost 16.3%
from the year-ago profit level of $2.21 per share. The upcast in
earnings was mainly attributable to strong operational
In the reported quarter, total revenue was $11,347 million,
higher than the Zacks Consensus Estimate of $11,207 million.
However, the quarterly figure dropped 4.4% from the year-earlier
level of $11,869 million.
Lockheed Martin ended the quarter with $78,700 million of
backlog. Of this, $29,200 million belonged to the Aeronautics
segment and $17,200 million to the Space Systems segment. The
rest is made up of $14,100 million for the Missiles and Fire
Control segment; $10,500 million for Mission Systems and
Training; and $7,700 million for Information Systems & Global
Aeronautics' quarterly sales decreased 1.8% year over year to
$3,632 million. The decline reflects fewer F-16 and F-35
deliveries and lower sustainment activity, partially offset by
higher net sales for the C-5 program.
Segmental operating profit fell marginally to $412 million, and
operating margin increased to 11.3% from 11.2%.
Information Systems & Global Solutions
Information Systems & Global Solutions' quarterly sales
decreased 10.2% to $2,059 million. The decline reflects lower net
sales and completion of certain programs like the Transportation
Worker Identification Credential program. These negatives were
however partially offset by the initiation of certain programs
like Global Information Grid Services Management Operations.
Segmental operating profit came in at $187 million, down 10.5%
year over year while operating margin remained at 9.1%, flat year
Missiles and Fire Control
Missiles and Fire Control segment's quarterly sales rose 2.7% to
$2,003 million. The increase reflects higher nets sales for air
and missile defense programs like Terminal High Altitude Area
Defense and Patriot Advanced Capability-3. However, these
increases were partially offset by lower net sales for technical
Segmental operating profit surged 18.7% to $356 million and
operating margin expanded to 17.8% from 15.4% in the reported
Mission Systems and Training
Mission Systems and Training segment's quarterly sales declined
8.8% year over year to $1,698 million. The decline reflects lower
sales for integrated warfare systems and sensors programs,
various ship and aviation systems programs, undersea systems
programs and various training and logistics programs. These
decreases were partially offset by higher sales for the Littoral
Combat Ship program.
Segmental operating profit rose 9% to $216 million while
operating margin expanded to 12.7% from 10.6%.
Space Systems' segmental sales decreased 5.4% to approximately
$1955 million. The decline reflects lower net sales for Orion
Multi-Purpose Crew Vehicle program and government satellite
programs. These decreases were partially offset by an increase in
sales for the Advanced Extremely High Frequency program.
Segmental operating profit fell 9% to $284 million while
operating margin declined to 14.5% from 15.1%.
Cash and cash equivalents of Lockheed Martin were $2,661 million
versus $1,898 million at year-end 2012. Long-term debt marginally
fell to $6,156 million from $6,158 million at year-end 2012.
The company repurchased 4.9 million shares at a cost of $607
million in the third quarter 2013. The company disbursed $370
million as dividends in the reported quarter. Indeed, during the
quarter, the company increased its quarterly dividend by 15.7% to
$1.33 per share and authorized the purchase of up to an
additional $3 billion of its common stock under the share
Lockheed Martin increased its revenue guidance for 2013 to
$45,000 million versus its previous expectation of $44,500
million to $46,000 million. However, it expects revenue to
decline year over year in 2014.
The company also increased its earnings per share forecast to the
range of $9.40 to $9.70 from the prior $9.20 to $9.50.
Lockheed Martin has succeeded in beating the top as well as the
bottom line. Also, the company continued to grow its backlog and
generate strong cash from operations while maintaining its cash
Despite the uncertainty plaguing the industry, the company has
been able to generate $15 billion in orders. Going forward, the
diverse product offerings, strong program execution and cost
reduction measures will help the company to sustain its
Lockheed Martin has a Zacks Rank #2 (Buy). Other defense stocks
also worth considering are
Erickson Air-Crane Inc.
Huntington Ingalls Industries, Inc.
Northrop Grumman Corp.
), all with a Zacks Rank #2 (Buy).
ERICKSON AIR-CR (EAC): Free Stock Analysis
HUNTINGTON INGL (HII): Free Stock Analysis
LOCKHEED MARTIN (LMT): Free Stock Analysis
NORTHROP GRUMMN (NOC): Free Stock Analysis
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