By Marjorie Censer
Lockheed Martin, the world’s largest defense contractor, said Tuesday that profit in its most recent quarter hit $904 million, up about 85 percent from the same three-month period a year ago.
Quarterly sales increased to $12.5 billion, up nearly 9 percent from a year earlier.
“We had a stronger finish to 2014 than we were expecting,” Bruce Tanner, Lockheed’s chief financial officer, said in a Jan. 27 call with analysts.
In the fourth quarter of 2013, Lockheed paid a special charge for workforce reductions as well as an impairment charge, reducing its profit. This quarter, the company said it benefited from the reinstatement of the U.S. research and development tax credit for 2014.
Lockheed’s sales and profits were buoyed by its aeronautics unit, which reported higher F-35 and C-130 sales. The C-5 program saw fewer deliveries, lowering sales by about $255 million.
Lockheed also saw improved sales from its missiles and fire control business, including higher sales of its Patriot Advanced Capability-3 missile, Guided Multiple Launch Rocket System and Joint Air-to-Surface Standoff Missile.
However, the company did record an impairment charge related to its technical services unit within its missiles and fire control business.
“The charge reflects the impact of market pressures on the Technical Services business, such as lower in-theater support as troop levels are drawn down and increased re-competition on existing contracts that are awarded primarily on the basis of price,” Lockheed said.
In its space systems business, higher sales in the Orion Multi-Purpose Crew Vehicle program and government satellite programs led to improved revenue and roughly flat profit.
The contractor’s information systems and global solutions business reported a decline in both sales and profit. Lockheed cited “reductions in direct warfighter support . . . and defense budgets tied to command and control programs.”
Marillyn Hewson, Lockheed’s chief executive, said during the call with analysts that the recent steps toward a more predictable federal budget process are “positive steps.”
She also said the defense contractor plans to continue to increase its research and development spending.
“We’re not going to cut back on R&D, even though our sales are not growing at the same trajectory,” she said. “It’s really the lifeblood of our company.”
Lockheed’s earnings report kicks off a busy week of earnings announcements from some of the largest defense contractors. Among those expected to report their results later this week are Northrop Grumman, General Dynamics and Raytheon.
Oshkosh Corp. said Tuesday that its quarterly sales and profit both dropped. In particular, its defense sales and income declined steeply; quarterly defense segment sales fell 44 percent, while operating income fell nearly 61 percent.
“The decrease in sales was primarily due to lower sales to the DOD as well as the absence of international sales of [Mine Resistant Ambush Protected] All-Terrain Vehicles,” Oshkosh said.