Lockheed Martin on Tuesday posted strong third-quarter financial results driven by gains in three of its reporting segments and the company raised its earnings guidance for the year due to a tax benefit.
Net income increased 9 percent to $1.6 billion, $5.66 earnings per share (EPS), from $1.5 billion ($5.14 EPS) a year ago, torching consensus estimates by 63 cents per share. Total operating margin was 13.9 percent, up 20 basis points from a year ago.
Sales increased 6 percent to $15.2 billion from $14.3 billion a year ago.
The strong increase in earnings was led by the company’s Aeronautics segment on the higher risk retirements for F-16 fighter sustainment contracts and F-35 Joint Strike Fighter production, development and sustainment contracts. The Missiles and Fire Control (MFC), and Space segments also contributed to the bottom-line gains.
For the year, Lockheed Martin expects sales of around $59.1 billion, just above the midpoint of its previous guidance range of between $58.3 billion and $59.8 billion. The company’s segment operating profit is expected to be around $6.4 billion, right in the middle of the previous outlook of between $6.3 billion and $6.5 billion. Per share results are forecast at around $21.55, 40 cents EPS above the high end of earlier guidance.
The increase in earnings guidance is primarily due to tax benefits and to a lesser extent improvement in operational performance, sales and margin.
Lockheed Martin also introduced “financial trends” for 2020 with sales pegged to be around $62 billion with segment operating margin between 10.5 and 10.8 percent. Total business segment operating margin for the first three quarters of 2019 was 11.2 percent.
President and CEO Marillyn Hewson said Lockheed Martin’s programs are well supported under the respective defense appropriations bills in the House and Senate, adding that continuing resolution that is funding the federal government through Nov. 21 won’t have an impact on its 2019 financial results given its funded backlog. However, if the continuing resolution, which restricts funding to fiscal 2019 levels, is extended, it could impact the company’s 2020 trends outlook depending on how long it remains in effect, she said.
The federal government’s fiscal 2020 began on Oct. 1.
Lockheed Martin sold off most of its interest in the Department of Energy’s nuclear security enterprise — Leidos bought the company’s Information Systems & Global Solutions segment in 2016 — but the aerospace prime is still intimately tied to the arsenal.
The Air Force awarded the company contracts to modify the Mk-21 re-entry vehicle to carry the future W87-1 style warheads aboard the future Ground-Based Strategic Deterrent missiles: the silo-based intercontinental ballistic missiles the service wants to deploy beginning in 2030 to replace the aging Minuteman III fleet. The re-entry vehicle technology maturation and risk reduction work — which Lockheed’s Valley Forge, Pa., campus will handle — is worth up to $138 million over four years, covering a $100 million three-year base and a one-year option worth about $30 million.
Lockheed is also part of the team Northrop Grumman has assembled to bid on the prime contract to build the Ground-Based Strategic Deterrent missiles themselves. With the only other eligible bidder for that work, Boeing, dropping out of the competition, Northrop looks poised to secure the contract. The new missiles are intended to serve into the 2080s.
Lockheed also built the Trident II-D5 nuclear-tipped ballistic missiles carried by Ohio-class submarines.
