Lockheed Martin Q1 Profit Rises 14%, Tops Estimates; Warns of US Budget Cuts Impact on Sales (LMT)

Lockheed Martin Q1 Profit Rises 14%, Tops Estimates; Warns of US Budget Cuts Impact on Sales (LMT)

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The United States’ largest defense contractor Lockheed Martin Corporation (LMT), which provides the Pentagon with jets, missiles, and other services, reported before the opening bell on Tuesday an increase in first quarter earnings on lower revenues. Looking forward, the company warns of potential negative impact from sequestration budget cuts on total sales.

The Bethesda, Maryland-based company posted a first quarter net income of $761 million, or $2.33 per share, up 14% from $668 million, or $2.03 per share, earned in the first quarter of last year. This easily topped the analysts’ expectation that LMT would earn $2.04 per share, according to Thomson Reuters.

Helping the better-than-expected earnings for the quarter was the retroactive reinstatement of the US research and development tax credit, which helped boost first quarter earnings by $46 million. This lower tax expense helped offset a variety of other charges posted in the first quarter.

Quarterly revenue for Lockheed Martin did fall however, coming in at $11.1 billion from $11.3 billion last year. But this still topped the analysts’ view of $10.31 billion.

Sales in Lockheed’s biggest division, aeronautics, fell 14% due to lower delivers of F-16 fighter jets. However, sales in the missles and fire control division rose 13%.

Analysts had a cautious view on Lockheed Martin’s potential first quarter earnings due to the potential effects from the across-the-board federal spending cuts enacted on March 1. However, the company’s management said that the effects of the cuts have been limited so far.

“While the impact on our business has been limited to date, we continue to work closely with our customers to better understand the future impact sequestration may have on our programs,” Lockheed Chief Executive Marillyn Hewson said in a statement.

Going forward, Hewson and other management expects the sequestrations cuts to have a signification impact going forward.

CFO Bruce Tanner, commenting on the sequestration cuts, said, “We expect those impacts to grow over the next three quarters, with the second and third quarters having larger reductions as the government’s full-year fiscal 2013 cuts are realized over the next six months.”

Despite the cautious view going forward, Lockheed Martin still expects earnings to be between $8.80 and $9.10 per share in 2013. However, the company is expecting lighter sales, on the lower end of its prior estimate range of $44.50 billion to $46.00 billion. Analysts expect the company to earn $8.92 per share on revenues of $45.12 billion in 2013.

Lockheed Martin shares were up $1.65, or +1.72%, during pre-market trading on Tuesday. The stock is up +3.86% year-to-date.

The Bottom Line
Shares of Lockheed Martin (LMT) have a dividend yield of 4.80% based on last night’s closing price of $95.85 and the company’s annualized dividend payout of $4.60 per share.

Lockheed Martin Corporation (LMT) is recommended at this time, holding a Dividend.com DARS™ Rating of 3.6 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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