The world's largest stand-alone defense contractor,
Lockheed Martin Corporation
), posted second quarter 2013 earnings of $2.64 per share,
comfortably surpassing the Zacks Consensus Estimate of $2.21 by
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Earnings in the reported quarter also surged almost 11% from the
year-ago profit level of $2.38 per share. The upcast in earnings
was mainly attributable to strong operational performance.
In the reported quarter, total revenue was $11,408.0 million,
higher than the Zacks Consensus Estimate of $11,170.0 million.
However, the quarterly figure dropped 4.3% from the year-earlier
level of $11,921.0 million.
Lockheed Martin expects revenues for this year to be on the lower
end of the $44,500 million to $46,000 million guided range
provided in Jan 2013. The cut in U.S. military spending will
likely reduce revenues by around $825 million.
Aeronautics' quarterly sales decreased marginally year over year
to $3,407.0 million in the reported quarter due to lower sales
from F-16, F-22 and C-130 programs. Partially offsetting the
decreases were higher sales from F-35 and C-5 programs.
Segmental operating profit fell 10.4% to $407.0 million, and
operating margin dropped 140 basis points to 11.9% in the
Information Systems & Global Solutions
Information Systems & Global Solutions' quarterly sales
decreased 7.2% to $2,101.0 million. Lower net sales from command
and control programs, the Transportation Worker Identification
Credential contract, Airborne Maritime Fixed Station Joint
Tactical Radio System contract, and Outsourcing Desktop
Initiative for NASA contract affected segment revenue in the
Segmental operating profit came in at $194.0 million compared
with $208.0 million in the year-ago period. Operating margin in
the reported quarter was in line with the second quarter 2012
level of 9.2%.
Missiles and Fire Control
Missiles and Fire Control segment's quarterly sales rose 10.9% to
$1,988.0 million. In the reported quarter, the upward spike in
sales came from higher volume for tactical missile programs,
primarily Patriot Advanced Capability-3 (PAC-3) and Terminal High
Altitude Area Defense (THAAD).
Segmental operating profit also surged more than 21.7% to $381.0
million and operating margin expanded 160 basis points to 18.6%
in the reported quarter.
Mission Systems and Training
Mission Systems and Training segment's quarterly sales declined
12.3% year over year to $1,770.0 million. Lower sales mainly from
the Persistent Threat Detection System program and various other
programs offset higher sales from the Littoral Combat Ship
Segmental operating profit rose 41% to $275.0 million while
operating margin expanded 580 basis points to 15.5% in the
Space Systems' segmental sales decreased 12.6% to approximately
$2,087.0 million. In the reported quarter, sales dipped due to
decreased commercial satellite deliveries and lower sales from
the Orion Multi-Purpose Crew Vehicle (Orion) program.
Segmental operating profit fell 8.0% to $276.0 million while
operating margin boosted 60 basis points to 13.2%.
Lockheed Martin finished the second quarter 2013 with $75,100
million of backlog. Of this, $26,500 million belonged to the
Aeronautics segment and $18,000 million to the Space Systems
segment. The rest is made up of $12,600 million for the Missiles
and Fire Control segment; $10,600 million for Mission Systems and
Training; and $7,400 million for Information Systems & Global
Cash and cash equivalents of Lockheed Martin were $2,845.0
million versus $1,898.0 million at year-end 2012. Long-term debt
fell to $6,140.0 million (including current portion) from
$6,308.0 million at year-end 2012.
The company repurchased 4.5 million shares at a cost of $465
million in the second quarter 2013 versus 2.2 million shares at a
cost of $181 million in the second quarter of 2012. The company
disbursed $371 million as dividends in the reported quarter and
$326 million in the second quarter of 2012.
Lockheed Martin boosted its full year 2013 earnings per share
guidance to the range of $9.20-$9.50 from the previous
expectation of $8.80-$9.10.
The company also increased its operating profit outlook to the
range of $4,550-$4,700 million from the earlier expectation of
$4,350-$4,500 million. Cash from operations is now expected to be
around $4,200.0 million versus $4,000.0 million earlier.
At the Peers
Of Lockheed Martin's major peers,
General Dynamics Corp.
) is scheduled to report its second quarter 2013 results on Jul
) on Jul 25.
Another major aerospace player,
), recently reported second quarter 2013 earnings from continuing
operation of 40 cents per share, beating the Zacks Consensus
Estimate by 5.3%.
The variety of product offerings, strong program execution and
cost reduction measures will help the company to sustain its
profitability. However, a major portion of its business comes
from the U.S. government. So, cuts in defense spending could
limit the results of its operating segments. It has factored
sequestration in its 2013 sales guidance, which is expected to be
at the low end of the prior range.
Going forward, growth in the Information Systems & Global
Services and the Mission Systems & Training segments is
critical as sequestration is expected to impact about $275
million in each of these segments.
Given the pros and the cons, the stock is expected to perform in
line with the broader market indices. Lockheed Martin retains a
Zacks Rank #3 (Hold).