Despite uncertainty about future budgets, Lockheed, which builds F-35 and F-16 fighter jets, Aegis missiles and coastal warships, raised its forecast for operating profit in the full 2012 year to $4.025-$4.125 billion from $3.9-$4.0 billion, or by 20 cents a share to $7.90 to $8.10. It affirmed its forecast of $45 billion to $46 billion in revenues and raised its forecast for cash from operations by $100 million to $3.9 billion.
Analysts said the improved cash guidance bodes well for Lockheed’s future dividend payments, which are already higher than most other defense companies. Stallard, the RBC analyst, said the revenue increase was “particularly notable in this tough defense environment, with continued progress on the margins,” but said Lockheed will probably have a tough time sustaining the 12.3 percent margins it was achieving now.
Lockheed said second-quarter net profit rose 5 percent to $781 million from $742 million a year earlier, thanks to strong results from its aeronautics, electronic systems and space systems businesses. Lockheed said revenue and profits declined slightly in the information systems and global solutions business, largely due to the Pentagon’s cancellation of part of the Joint Tactical Radio System, and completion of a U.K. census program. Earnings from continuing operations gained 11.2 percent to $2.38 per share from $2.14 a year earlier. Net sales rose 3.3 percent to reach $11.9 billion in the quarter, up from $11.5 billion in the same quarter of 2011, the company said.
Analysts polled by Thomson Reuters I/B/E/S forecast second-quarter earnings per share of $1.91 and revenues of $11.29 billion. Lockheed said second-quarter cash from operations fell 5.5 percent to $845 million, after pension contributions of $607 million, but should rise to over $1 billion in the third quarter. Pension contributions in the first two quarters reached $1.1 billion, completing Lockheed’s required funding for the year. The company paid shareholders $326 million in cash dividends in the second quarter and bought back 2.2 million shares for $186 million. That brought the total buyback for the first half of the year to 4.9 million shares at a cost of $428 million.
Chief Financial Officer Bruce Tanner told analysts on Tuesday the company still planned to complete $1 billion in share repurchases in 2012, but said it was premature to discuss dividends.
Sales were up more than 18 percent in the space division, buoyed by increased commercial satellite deliveries, as well as increased production volume on the Orion multi-purpose crew vehicle program for NASA. Tanner said results might be slightly less stellar in the second half, noting revenues would be about $1 billion less in the third quarter than the year-earlier period. He said a 10-week strike at the Fort Worth, Texas, plant and other sites prompted the company to shave $200 million off projected full-year sales for the aeronautics division.
Tanner said that included about $100 million in lower-than-expected revenues from the F-35 fighter program, and about $100 million from the F-16 fighter program, where three aircraft deliveries are now expected to slip into early 2013. Christopher Kubasik, who takes over as CEO in January, said the F-35 program was about 30 percent ahead of its flight test plan as of June. Kubasik said the company is also “making progress” in its negotiations with the Pentagon to finalize a multibillion-dollar contract for a fifth batch of F-35 production aircraft, talks that have been underway since December. “Each day we get closer, so I think we’re progressing,” Kubasik told reporters.
Tanner said he expected a deal “in the not-to-distant future.”