(Corrects comment from Hewson in sixth paragraph of story published Jan. 24.)
Lockheed Martin Corp. (LMT:US), the world’s largest defense contractor, forecast record profit in 2013 even as the company and other suppliers to the Pentagon face the prospect of spending cuts to reduce the U.S. deficit.
Lockheed said today that profit for the year may be as much as $9.10 a share, which will be its highest if it reaches the goal. Lockheed fell in New York trading after also announcing fourth-quarter results that missed analysts’ estimates.
The company’s projected full-year profit of $8.80 to $9.10 a share exceeded the $8.28 a share average estimate of 22 analysts surveyed by Bloomberg. This week, two of the other biggest defense contractors -- Raytheon Co. (RTN:US) today and General Dynamics Corp. (GD:US) yesterday -- offered 2013 forecasts that fell short of analysts’ predictions.
“Lockheed’s performance in the fourth quarter showed broad-based demand for its portfolio of products,” Howard Rubel, an analyst at New York-based Jefferies Group Inc, wrote in a note to clients. Lockheed’s growth in “backlog was impressive,” Rubel said, citing a 2 percent increase to $82.3 billion at the end of 2012.
Across-the-board cuts in U.S. defense spending of $45 billion through September will be imposed unless President Barack Obama and Congress agree by March on an alternative way to reduce the federal deficit. While Lockheed had previously raised the specter of eliminating thousands of jobs if the cuts known as sequestration go through, the company’s new chief executive officer said today she doesn’t foresee firing people this year.
No Job Cuts
“As we look at our go-forward plan for this year, we have a very strong portfolio and a solid plan in place,” Marillyn Hewson said during a conference call with reporters. “And even as we look at sequestration and potential budget reductions, we’re not looking at planned job reductions.”
Lockheed declined 2.9 percent to $93.25 at the close in New York trading and has gained 13 percent in the past 12 months. Raytheon fell 2.9 percent to $56.54 and has gained 14 percent in the past 12 months.
Lockheed’s fortunes depend in large measure on the F-35 jet fighter, its biggest program and the Pentagon’s costliest weapon system, at an estimated development cost of $395.7 billion.
The Bethesda, Maryland-based company said today that its fourth-quarter earnings were reduced partly by a charge related to eliminating jobs because F-35 production had slowed.
Income from continuing operations for the quarter was $569 million, or $1.73 a share, compared with $698 million or $2.14 a share in the same quarter a year earlier, Lockheed said in a statement today. The average estimate of 21 analysts surveyed by Bloomberg was for a profit of $1.82 a share.
The Pentagon’s commitment to the F-35 also provides Lockheed some protection against threatened budget cuts.
Last month Lockheed reached an agreement with the Pentagon on a contract for the fifth lot of the jets, obligating funds and ensuring production even if the automatic cuts take effect in March.
Lockheed said it expects to conclude contracts with the Pentagon for two more lots of the planes by the middle of the year and to begin work on another batch that will turn out jets for Japan and Israel.
In 2013, Lockheed plans to deliver 36 F-35 jets, or 20 percent more planes than it did in 2012, Bruce Tanner, the company’s chief financial officer, told reporters on the conference call.
Lockheed’s and Raytheon’s profit for this year will be boosted by tax credits the companies can claim for research and development under the tax deal signed into law by Obama this month. The law extending the tax credit will add 23 cents a share to Lockheed’s profit in 2013 and about 15 cents a share to Raytheon’s profit, according to the companies.
Raytheon, the world’s largest missile maker, said today that profit from continuing operations for the year will be $5.16 to $5.31 a share. The average of 22 analysts surveyed by Bloomberg was for a profit of $5.46 a share on sales of $24.1 billion.
For the fourth quarter, Raytheon’s profit from continuing operations was $466 million or $1.41 a share, compared with $539 million or $1.56 a share a year earlier, the Waltham, Massachusetts-based company said in the statement. The average of 21 analysts surveyed by Bloomberg forecast a profit of $1.31 a share. Sales increased less than 1 percent to $6.44 billion.
Raytheon has a record backlog of orders “that bodes well for the next two to three years,” Dave Wajsgras, Raytheon’s Chief Financial Officer said in a phone interview. The company also has a “very strong pipeline of opportunities internationally,” he said.
International sales may grow 3 percent to 5 percent in 2013 offsetting a matching decline in domestic sales, Wajsgras said.
On a conference call with analysts, Raytheon’s Chairman and Chief Executive Officer Bill Swanson said potential international orders in 2013 included missile defense system sales to Qatar, Turkey and Oman worth several billion dollars.
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