By Andrea Shalal-Esa
WASHINGTON Jan 23 Lockheed Martin Corp,
maker of F-35 fighter jets, satellites and warships, on Thursday
forecast higher earnings in 2014 after charges linked to U.S.
defense budget cuts and workforce reductions depressed earnings
in the fourth quarter.
Lockheed Chief Financial Officer Bruce Tanner told reporters
2014 would likely mark a "trough" in U.S. military spending,
with recent budget agreements paving the way for a more stable
outlook going forward.
He said congressionally mandated budget cuts in 2013 may
have a lingering effect on revenues, projected to be flat to
slightly lower in 2014, but a recent congressional budget deal
meant U.S. defense spending would edge up in coming years.
"We're hopeful that 2014 is kind of the bottoming out if you
just take a look at the recently signed budget agreement,"
Lockheed's higher earnings forecast reflected a swing to
expected income from its pension accounts after years of
payments that had lowered earnings, he said.
Chief Executive Marillyn Hewson told reporters Lockheed
remained focused on becoming a "stronger, leaner, healthier
company," by cutting costs, improving operational efficiencies,
investing in innovations, and boosting international orders.
Foreign orders accounted for 23 percent of orders received
and 17 percent of sales in 2013, with revenues set to grow a
"little under 20 percent" in 2014, Tanner said.
Lockheed shares fell 1.7 percent to $154.02 in lower overall
market trading on the New York Stock Exchange.
Joe Nadol at JP Morgan said Lockheed's results might prove
"a bit of a disappointment" to investors since the company had
consistently exceeded expectations in recent quarters.
Lockheed reported its fourth quarter net earnings from
continuing operations fell 14.2 percent to $488 million, or
$1.50 per share, from $569 million, or $1.73 per share, a year
earlier. Revenues dropped to $11.5 billion from $12.1 billion.
It said its fourth-quarter earnings included a non-cash
goodwill impairment charge of $195 million linked to U.S.
defense spending cuts that reduced earnings by $176 million.
It also included severance charges of $171 million that cut
earnings by $111 million. The two items combined reduced
earnings per share by $0.88, the company said.
It said it did not expect similar goodwill charges for other
reporting units in the near term.
Net earnings also included pension adjustments, although at
a lower level than seen in the year-earlier period.
Analysts polled by Thomson Reuters I/B/E/S had forecast net
quarterly earnings from continuing operations of $668.5 million
or $2.02 per share on revenues of $11.34 billion.
Excluding the goodwill charge, Lockheed's earnings per share
totaled $2.04, beating the consensus forecast of $1.95,
according to Thomson Reuters I/B/E/S.
Rob Stallard, analyst with RBC Capital Markets, said an
unexpected goodwill charge and higher tax rate kept results
below his expectations, but Lockheed continued to benefit from
aggressive cost-cutting measures adopted in recent years.
Lockheed, the Pentagon's No. 1 supplier, said full-year
earnings from continuing operations rose to $3.0 billion, or
$9.04 per share, up from $2.7 billion, or $8.36 per share, in
Revenues fell to $45.4 billion in 2013 from $47.2 billion in
It said it expected slightly lower to flat revenues of $44
billion to $45.5 billion in 2014, but earnings per share were
likely to rise to $10.25 to $10.55.
Lockheed's Hewson said the company reached a record backlog
of $82.6 billion in 2013. She said its products were strongly
supported in the U.S. budget plan, and continued to attract
strong international interest.
She said Lockheed would work closely with the Navy as it
weighed changes in its plan to buy 52 Littoral Combat Ships
built by Lockheed and Australia's Austal.
Hewson said reports of a possible cut in the total buy were
not too troubling since Lockheed remains under contract to
deliver 10 ships.
Sales were down across the company's five business areas in
the fourth quarter, but three of the five - missiles and fire
control, mission systems and training, and space systems -
reported higher operating profit, Lockheed said.