Lockheed Martin Corp. (LMT), the nation's largest defense contractor, said Tuesday third-quarter earnings rose 41 percent behind higher sales of military transport planes and an increase in the company's information technology business.

Lockheed reported it earned $307 million, or 69 cents per share, in the July-September period compared to $217 million, or 48 cents per share, a year ago. Last year's results were lowered by 18 cents per share on charges from early repayment of debt.

Lockheed's earnings beat Wall Street analyst expectations of 65 cents per share, according to Thomson First Call.

In afternoon trading on the New York Stock Exchange (search), Lockheed shares were up 60 cents to $54.10.

Sales rose 4 percent to $8.4 billion from $8.1 billion last year. Much of that rise came in Lockheed's aeronautics and information technology businesses, offsetting a sales dip in the company's space systems segment.

Growth in Lockheed's C-5 cargo plane (search) sales contributed to a 3 percent rise in aeronautics revenue, up from $2.67 billion in the third quarter of 2003 to $2.76 billion this year. Sales also rose for the company's F/A-22 and F-35 fighter plane programs, but were lower for the F-16 jet.

Information technology sales were up 33 percent to $991 million from $743 million. Space systems sales dipped 4 percent because of a downturn in commercial satellite business and fewer rocket launches.

Pension costs continued to drag on Lockheed's earnings. It reported $148 million in pension-related expenses in the quarter, part of $600 million spread evenly across 2004. The company expects pension expenses to be between $300 million and $550 million in 2005.

Lockheed also raised its outlook Tuesday for the year after winning several contracts, including a $3.3 billion project to develop a satellite network for the Navy, awarded in September.

Lockheed expects to post sales of $34.4 billion to $34.8 billion this year and earn between $2.65 to $2.75 per share. Analysts forecast sales of $34.7 billion and earnings of $2.68 per share in 2004.

"All those (contracts) really gave us confidence in the outlook," said Lockheed chief financial officer Christopher Kubasik.

However, the company's 2005 earnings projection of between $3 and $3.25 per share on sales of $34.5 billion to $36 billion was lower than Wall Street estimates. Analysts predicted 2005 earnings of $3.29 per share on sales of $36.29 billion.

Analyst Paul Nisbet of JSA Research said Wall Street is more bullish than the company on the impact of Lockheed's ongoing programs and new contracts will have on the 2005 results.

"They've been lower all along, but they've narrowed the gap here," he said. "Their programs appear to have so much behind them that the Street has decided their guidance isn't high enough."

Along with the Navy satellite system, Lockheed was recently awarded contracts that include $330 million to build a spaceship to patch up the Hubble Telescope (search) and a $3 billion contract from NATO (search) to build a new system to replace the Patriot missile system.

Lockheed expects to learn in December about a contract to build a new helicopter to carry the president, known as Marine One (search). Teamed with a British-Italian consortium, Lockheed is competing with Sikorsky Aircraft Corp. for the estimated $1.6 billion to replace the fleet of presidential helicopters.

For the first nine months of 2004, Lockheed earned $894 million, or $2 per share, up from $709 million, or $1.57 per share in 2003. Sales were up to $25.56 billion from $22.85 billion last year.