Lockheed Martin Misses Street Estimates, Stock Drops

lockheedmartinlogLockheed Martin posts profit, sees 2010 down

Lockheed Martin Corp posted better-than-expected quarterly profit aided by a lower tax rate and share count on Tuesday, but revenue missed Wall Street estimates and the defense contractor warned earnings would drop in 2010, sending its shares down more than 5 percent.

“It is difficult to find any positives” in the results, Goldman Sachs analyst Noah Poponak said in a note to clients. “Similar to last quarter’s disappointment, we believe results indicate that the tides are changing in defense vs. the weaker-than-expected results being attributable to company- specific issues.”

Wall Street is concerned that defense contractors will underperform as President Barack Obama curbs spending on traditional weapons systems. This year, Pentagon cancellations of programs such as the VH-71 presidential helicopter and the scale-back of some missile programs have hurt Lockheed’s backlog.

FBR Capital Markets analyst Patrick McCarthy cited concern about the revenue outlook for the fourth quarter and the below-consensus 2010 earnings forecast.

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  • Third quarter net sales of $11.1 billion; Year-to-date net sales of $32.7 billion
  • Third quarter earnings per share of $2.07; Year-to-date earnings per share of $5.61
  • Third quarter net earnings of $797 million; Year-to-date net earnings of $2.2 billion
  • Generated $1.4 billion in cash from operations for the quarter; $3.8 billion year-to-date
  • Increases outlook for 2009 earnings per share and return on invested capital
  • Reaffirms outlook for 2009 net sales
  • Updates 2009 cash from operations for anticipated discretionary pension plan pre-funding of at least $1 billion
  • Provides initial outlook for 2010

Lockheed Martin Corporation (NYSE: LMT – News) today reported third quarter 2009 net earnings of $797 million ($2.07 per diluted share), compared to $782 million ($1.92 per diluted share) in 2008. Net earnings in 2009 included higher pension expense as disclosed in our Jan. 22, 2009 earnings release and in our 2008 Form 10-K. The third quarter of 2009 included a FAS/CAS pension adjustment of ($113) million and an unusual tax benefit of $58 million from the resolution of an IRS examination. These items together decreased third quarter 2009 net earnings by $15 million ($0.04 per share). The third quarter of 2008 included a FAS/CAS pension adjustment of $32 million and an unusual gain of $44 million, which together increased net earnings by $49 million ($0.12 per share).

Net sales for the third quarter of 2009 were $11.1 billion, compared to $10.6 billion in 2008. Cash from operations for the third quarter of 2009 was $1.4 billion, compared to $1.1 billion in 2008.

“Our third quarter results keep the Corporation on track to achieve full year 2009 operational and financial commitments,” said Bob Stevens, Chairman, President and CEO. “Our diverse portfolio of programs is well positioned to provide critical, global security solutions to our customers as we support their changing program priorities and generate shareholder value.”

Read the full statement.