By Dow Jones Business News, October 22, 2013, 08:15:00 AM EDT
Lockheed Sees Overseas Sales Countering Domestic Cuts
The head of Lockheed Martin Corp. ( LMT ) said Tuesday that international expansion is expected to counter deepening
Pentagon budget cuts next year and help the world's largest defense contractor by sales ride out another round of
Lockheed's annual sales are set to fall this year for the first time in a decade because of crimped domestic spending,
but the decline is seen moderating next year as it ships more of its F-35 jet fighters and missile-defense systems to
U.S. and European defense companies face years of flat or declining domestic sales that they aim to counter with more
international business, though all are chasing a limited number of deals focused on countries in Asia and the Middle
Marillyn Hewson, Lockheed's chief executive, said on a postearnings call that she was confident it could reach its
target of growing the international business to 20% of total sales "in the next few years," from around 15% now.
Lockheed's overseas contribution has lagged some rivals, but Ms. Hewson pointed to orders for the F-35--half of them
from international buyers over the next five years--as providing a path to its target.
Her comments came as Lockheed raised its 2013 earnings guidance and tightened the range for sales after a smaller-
than-expected impact from the automatic Pentagon cuts that came into force on March 1. The sequester is estimated to
have trimmed full-year revenue by between $400 million and $450 million, half its initial forecast.
The guidance came alongside a forecast-beating 20.1% rise in third-quarter profit, though only one of its five
operating units delivered higher operating earnings as sales softened across most of the business.
The Bethesda, Md., company lifted its 2013 profit guidance to $9.40 to $9.70 a share from $9.20 to $9.50 a share,
ahead of analysts' expectations and the $8.54 a share earned last year.
Sales guidance for 2013 was narrowed slightly to $45 billion, down from $47.2 billion a year earlier. The company said
it expects 2014 revenue to "decline slightly" from this year, though the outlook came with a large health warning
related to ongoing uncertainty over the Pentagon budget.
The F-35 program will be the main source of organic growth in 2014. It already accounts for 15% of group revenue and
is expected to expand by another 15% next year compared with 2013, the company said.
Lockheed has been focused on boosting the efficiency of core programs and returning cash to shareholders, with the
company saying operating margins will remain above 11.5% next year.
Three of its business units beat that mark in the third quarter, led by the 17.8% generated by missiles and fire
control, which after a series of contract wins was also the only one of the quintet to raise sales in the quarter from
the prior year.
Net profit in the quarter ended Sept. 29 rose to $873 million from $727 million a year earlier, with per-share
earnings climbing to $2.66 from $2.21. The latest quarter included a $23 million charge for job cuts.
Lockheed's shares were recently up 2.9% at $128.97.
Write to Doug Cameron at firstname.lastname@example.org
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
Copyright (c) 2013 Dow Jones & Company, Inc.