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Slow jet sales offset by space business at Lockheed in 1Q

Tuesday, April 22, 2008

WASHINGTON —  Defense contractor Lockheed Martin Corp. said its first-quarter earning rose 6 percent as higher sales of space equipment, missiles and other combat tools offset a dip in fighter jet sales.

Lockheed, the world's largest defense supplier, said it earned $730 million, or $1.75 per share, up from the $690 million, or $1.60 per share in the first quarter of 2007. Revenue was $9.98 billion for the quarter, compared with $9.27 billion during the same period last year.

Analysts surveyed by Thomson Financial expected Lockheed to make $1.63 per share on sales of $9.69 billion.

The company also raised its outlook for 2008 by 10 cents, saying it expects to earn between $7.15 and $7.35 for the year on revenue of between $41.8 billion and $42.8 billion. Much of the improvement is expected to come in the company's space division.

Analysts expect Lockheed to earn $7.37 per share on $42.8 billion of revenue.

Shares fell $2.66, or 2.5 percent, to $103.91 at the open of trade Tuesday.

The company's aeronautics division, its largest by revenue, saw sales drop slightly to $2.8 billion as it continues to transition from selling older fighters like the F-16 to new models such as the F-35 and F-22. Lockheed has said it expects 2008 to be a trough year for combat aircraft before sales start to increase again.

But Lockheed's three other business units all posted sales gains, including an 11 percent increase to $2.78 billion in the electronic systems division that makes missiles. Space systems, maker of satellites and other space tools, was up 5 percent to $1.88 billion while information systems and global services rose 17 percent to $2.5 billion.

Defense contractors have largely weathered the nation's bout of economic malaise, benefiting from still lofty military spending and multiyear Pentagon contracts that often last longer than business cycles. Lockheed holds a massive contract for the new F-35 fighter jet for three branches of the military, and has a stake in shipbuilding and other big defense projects.

Lockheed Chief Financial Officer Bruce Tanner said in an interview that the only effect the credit squeeze had on the company is that lower interest rates have reduced the money Lockheed makes on its cash holdings of about $3 billion.

"One of the reasons that I could only increase the earnings (forecast) a dime this quarter is that the cash I've got sitting on the balance sheet is making less interest," he said.

Lockheed and the Pentagon have faced sharp criticism over some programs, including the F-35, which is now expected to cost $298.8 billion over its lifetime.

The Government Accountability Office warned of escalating costs and delays in the program in a report last month, but the Pentagon said the price tag was leveling off. Tanner said the company has had to make necessary design adjustments to the plane, and that the program's course was no different from other successful fighter projects like the F-16.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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