UPDATE 2-Lockheed sees higher earnings, weaker sales for 2013

Thu Jan 24, 2013 12:22pm EST

* Sees 2013 earnings per share of $8.80 to $9.10
    * CEO says focus on further cost-cutting
    * Shares down 2.3 percent


    By Andrea Shalal-Esa
    Jan 24 (Reuters) - Lockheed Martin Corp, the Pentagon's biggest
supplier, forecast 2013 earnings growth above analysts' estimates as it expects
a record backlog and continued efforts to cut costs to overcome an anticipated
weakening of sales.
    Lockheed said on Thursday that earnings per share had dropped 19 percent to
$1.73 in the fourth quarter from $2.14 a year earlier, reflecting a large
noncash pension adjustment, higher income tax expenses and a charge for job cuts
in its aeronautics division.
    Excluding those one-time items, Lockheed earned $1.91 per share, beating the
consensus view of analysts polled by Thomson Reuters I/B/E/S, who had forecast
$1.82 per share.
    Lockheed said it expected earnings per share to rise to between $8.80 and
$9.10 in 2013 from $8.36 in 2012.
    The company is assuming the U.S. Congress will avert $500 billion in
additional Pentagon spending reductions known as "sequestration" that are due to
take effect over the next decade, starting in March.
    Chief Financial Officer Bruce Tanner told reporters on a conference call
that it remained unclear how any additional cuts to the U.S. defense budget
would be implemented, which made it difficult to forecast the coming year's
results.
   
    Chief Executive Officer Marillyn Hewson, who took over on Jan. 1, told
reporters the company's results in 2012 were "extraordinary" but that Lockheed
remained focused on cutting costs and ensuring performance on key contracts.
    Lockheed said fourth-quarter sales fell slightly to $12.1 billion from
$12.21 billion.
    The company said it expected sales of $44.5 billion to $46 billion this
year, down from $47.18 billion in 2012, but Hewson said there were no additional
workforce reductions in the works at this point.
    Shares of Lockheed were down 2.3 percent at $93.89 in midday trading.
    Rob Stallard, analyst with RBC Capital Markets, said it was a good quarter
for Lockheed, with its longer-cycle equipment portfolio offsetting sharper
revenue declines in its shorter-cycle information services division.
    He said the company's 2013 outlook for operating profit and earnings per
share had also beaten analysts' expectations.
    Hewson told reporters the company's F-35 Joint Strike Fighter program was
progressing "very well," and she expected to finalize agreements for sixth and
seventh production orders with the Pentagon in the first half of 2013.
 
    Hewson acknowledged that the F-35 fighter used similar lithium-ion batteries
as those being investigated on Boeing Co's 787 Dreamliner, but said the
company saw no problem since the F-35 equipment was made by a different
manufacturer and had been tested and vetted extensively.
    She said investigators were still trying to determine what caused a problem
that prompted the Pentagon to ground the U.S. Marine Corps variant of the F-35
last week and that it was too soon to predict any effect on the flight test
program.
    Lockheed said three of its five divisions had reported higher sales and
operating profits for the fourth quarter, but the space systems and information
systems divisions posted lower profits and sales.
    The company said sales and earnings in the information systems and global
solutions business were hit by a continuing downturn in federal information
technology budgets and the impact of a continuing resolution that took effect
Oct. 1 and which bans new program starts. Sales fell 14 percent in the quarter,
while earnings dropped 20 percent, the company said.
    The space systems business also saw sales and earnings fall in the fourth
quarter. 
    Lockheed also announced several personnel changes. It said Rick Ambrose, who
joined the company in 2000, would become executive vice president of its space
systems business, replacing Joanne Maguire, who will retire on April 1.
    Sondra Barbour, who has been with the company for 20 years, will become
executive vice president of the information systems and global solutions
business, replacing Linda Gooden, who will retire on April 1.
    Hewson said both executives had been planning to retire for some time.