U.S. arms makers see flat sales in face of cuts

(Reuters) - Defense contractors Lockheed Martin Corp and Raytheon Co topped estimates for fourth quarter profit, but said sales would be flat this year as they cope with cuts in defense spending.

The Pentagon, the world's largest weapons buyer, is looking to cut defense expenditures by nearly $500 billion over the next decade. On Thursday, it disclosed a budget plan that would cut nearly 100,000 ground forces in 2013 in a bid to reach that goal.

Wayne Plucker, aerospace industry manager at Frost & Sullivan, a consulting firm, said large defense contractors have been downsizing operations for two years and will be able to weather cuts better than smaller companies.

"Many of the large players are in the right places, things like command, control, surveillance and reconnaissance, IT and many other things that fundamentally the military can't live without," Plucker said.

Lockheed, the world's largest defense contractor, said the budget plan reflects a new security strategy that will ensure deficit reductions are met.

"The clear contours of the new strategy align exceedingly well with our portfolio and our experience," Lockheed Chief Executive Robert Stevens said during an earnings conference call.

Lockheed's shares closed up about 1 percent at $82.47, while Raytheon were 0.3 percent higher at $49.89.

Lockheed LMT.N. and Raytheon (RTN.L) said they would continue to focus on cutting costs while looking to international sales to cushion U.S. softness. Boeing also said this week that greater spending in international markets would help its defense business.

General Dynamics Corp (GD.N), maker of Gulfstream jets and tanks, said on Wednesday that strong demand for business jets and its incumbent positions on U.S. defense programs would help increase its profit this year.

Lockheed, developer of the F-35 fighter jet, posted per-share earnings from continuing operations of $2.14 in the fourth quarter, down from $2.28 a year earlier, but topping analysts' average estimate of $1.94.

Raytheon, maker of Patriot missiles and other equipment, said it was anticipating more international sales this year, as foreign orders now account for more than a third of the company's backlog.

Lower operating expenses helped Raytheon report a rise in fourth-quarter profit to $543 million, or $1.57 a share, from $459 million, or $1.25 a share, a year earlier. Quarterly sales fell to $6.4 billion from $6.9 billion. Adjusted for items, profit was $1.58, compared with $1.34 expected by analysts, according to Thomson Reuters I/B/E/S.

(Editing by Maureen Bavdek and Andre Grenon)