Lockheed Martin Corp, the Pentagon’s biggest weapons supplier, reported a better-than-expected 14.8 percent rise in per-share earnings on Tuesday but warned that full-year revenue was likely to come in at the low end of earlier guidance due to U.S. budget cuts.
Lockheed is the first of the big U.S. weapons makers to report first-quarter earnings. Analysts have forecast lower sales and earnings across the sector as U.S. military spending declines after more than a decade of sharp growth.
Lockheed, which builds F-35 fighter jets, Aegis missiles and new coastal warships, said revenue for the full year would be at the low end of the $44.5 billion to $46 billion range forecast in January, with the additional budget cuts seen reducing net sales by about $825 million.
But the company stood by its previous guidance for full-year operating profit and earnings per share, citing stronger-than-expected results in all five of its business sectors in the first quarter.
Helped by a lower tax expenses, first-quarter net profit rose to $761 million, or $2.33 per share, from $668 million, or $2.03 a share, a year earlier. Revenue dropped 2 percent to $11.1 billion.
Analysts polled by Thomson Reuters I/B/E/S had expected earnings of $2.04 per share on revenue of $10.3 billion.
Sales in its biggest division, aeronautics, dropped 14 percent, mainly due to lower deliveries of F-16 fighter jets, while sales in the missiles and fire control division rose 13 percent.
“While the impact on our business has been limited to date, we continue to work closely with our customers to better understand the future impact sequestration may have on our programs,” Lockheed Chief Executive Marillyn Hewson said in a statement, referring to across-the-board federal spending cuts.
Hewson told reporters she still expects sequestration to have a “significant” impact going forward.
Chief Financial Officer Bruce Tanner told reporters he expected the mandatory spending cuts to have a greater impact on Lockheed’s results in the second and third quarters of 2013.
“Sequestration hasn’t really hit thus far,” he said. “We expect those impacts to grow over the next three quarters, with the second and third quarters having larger reductions as the government’s full-year fiscal 2013 cuts are realized over the next six months.”
Lockheed and other arms makers are trying to maintain earnings by cutting overhead and pumping up weapons sales to other countries. Many are also looking for opportunities in other markets outside the defense sector.
Lockheed said first-quarter earnings were reduced by a non-cash pension adjustment of $121 million and a special charge of $30 million related to workforce reductions at its information systems and global solutions business.
Those items were partially offset by lower income tax expenses thanks to a retroactive reinstatement of a federal research and development tax credit, the company said.
Lockheed said cash from operations was $2.1 billion in the quarter, a huge jump from just $458 million a year earlier.
The company repurchased 5.1 million shares for $461 million in the first quarter, compared with 2.7 million shares for $242 million a year earlier.
