(Corrects first paragraph to show 23 percent rise is net profit, not operating profit)
WASHINGTON, April 22 (Reuters) - Lockheed Martin Corp , the Pentagon's largest supplier, on Tuesday reported a 23 percent jump in net profit and earnings per share in the first quarter, and raised its earnings per share outlook for the full year by 25 cents.
But Lockheed, maker of the F-35 fighter jet, satellites and coastal warships, said U.S. government budget cuts continued to depress revenues in 2014, with sales to the U.S. military likely to drop by 6.0 percent in 2014 after a 4.0 percent drop in 2013.
Chief Financial Office Bruce Tanner told reporters on Tuesday that the lost revenue amounted to "a pretty significant" 10-percent drop over two years, which had reversed the company's expectation that 2014 would be a growth year.
But earnings and cash flow from operations remained strong, and foreign sales had offset the drop in U.S. orders, he said.
"We're off to a good start for 2014, building upon a very strong performance year in 2013," he said.
The company reported net earnings of $933 million for the quarter, or earnings per share of $2.87, up from $761 million or $2.33 per share in the first quarter of 2013.
It forecast earnings per share of $10.50 to $10.80 for the full year, an increase of 25 cents from its guidance in January, and left unchanged its forecast of $41.5 billion to $43 billion in sales.
Revenues fell 4.0 percent compared to the first quarter of 2013, with only one of five business segments - aeronautics - reporting higher sales, as deficit-reducing measures began to take a toll on military spending.
The aeronautics sector reported revenues of $3.39 billion for the quarter, a $200 million or 6.0 percent increase from a year earlier.
Tanner said international sales had helped offset the decline in U.S. orders in the first quarter and would account for about 20 percent of full year revenues in 2014, up from 17 percent the previous two years.
Tanner said Lockheed expected additional orders for the F-35 fighter jet, the company's single biggest program,from Australia, South Korea, Israel and Singapore, but he did not expect those orders to close in 2014.
"I think we're on the cusp of closing some fairly good-sized orders in the not-too-distant future, but I don't think they're necessarily going to close in 2014," Tanner said. "These things are going to take some time to manifest themselves in terms of translating into an actual contract award."
He said the F-35 would account for about 16 percent of Lockheed's revenues in 2014, and that percentage was expected to continue increasing in coming years. By 2018 or 2019, when the program reaches full rate production, the F-35 would account for about 25 percent of Lockheed's overall revenues, he said.
Tanner said Lockheed was also in talks with potential customers in the Middle East about a variant of the small warship it builds for the U.S. Navy, but did not expect any of those talks to result in a firm contract in 2014 either.
Higher pension income of $86 million in the first quarter also helped boost earnings, a big swing from the $121 million pension expense seen a year earlier, Lockheed said.
Tanner attributed the swing to an increase in interest rates that changed the discount rate used to calculate Lockheed's pension liabilities at the end of last year, and resulted in a significant reduction that would continue throughout the year.
(Reporting by Andrea Shalal; Editing by Stephen Coates)