Lockheed Shoots Past Estimate - Analyst Blog

Before markets opened today, Lockheed Martin Corporation (LMT) reported strong fourth quarter fiscal 2009 results and raised its fiscal outlook. In the reported quarter with EPS of $2.17, the company beat both the Zacks Consensus Estimate and the year-ago EPS of $1.98 and $2.05, respectively.

However, Lockheed Martin’s net earnings increased only $4 million to $827 million in the reported quarter compared to $823 million in the year-ago quarter. The upside in EPS was fueled to a large extent by lower outstanding shares, which decreased to 381.9 million from 400.7 million in the year-ago quarter.

In a reversal of fortune, pension accounting adjustment negated $114 million from the quarter while in the year-ago quarter this adjustment had added $32 million to earnings. The spike in pension liability was due to the lower value of the company’s retiree fund.

Behind the Headline Numbers

With $12.5 billion quarterly revenue, Lockheed Martin beat the year-ago result of $11.1 billion by 13%. The upside in sales year over year came from higher numbers across the board, but especially from the Space Systems segment (SS) (28%). Of the rest, Aeronautics and Electronics Systems (ES) grew a respectable 13% and 12% year-over-year, respectively. However, the Information Systems & Global Services segment (IS&GS) grew only marginally -- 2% year-over-year. Fiscal 2009 revenues also increased 6% to $45.2 billion from $42.7 billion in fiscal 2008.

Operating profit also rose 13% year-over-year to $1.4 billion in the reported quarter. The growth was seen across the board with the exception of the IS&GS segment, which fell 10% year-over-year. Of the rest SS segment rose 43% while Aeronautics and ES segment grew 15% and 11%, respectively. SS operating profit escalated due to higher volume and improved performance on government satellite programs.

Lockheed Martin ended fiscal 2009 with cash and cash equivalents of $2.4 billion compared to $2.2 billion at year-end fiscal 2008. The company generated $3.2 billion of cash in operating activities at the end of fiscal 2009, compared to $4.4 billion in cash generated in fiscal 2008. Long-term debt increased to $5.1 billion at the end of fiscal 2009 from $3.6 billion at the end of fiscal 2008. 

Lockheed Martin finished fiscal 2009 with $78 billion of backlog, of which almost $26.7 billion belonged to the Aeronautics segment and $21.9 billion to the ES segment.

Lockheed Martin’s upside in earnings came as a surprise since earnings estimates were going down over the past month, with the quarterly Zacks Consensus estimate going down by a penny in the last 30 days. Overall, three of the 22 analysts covering the stock revised their estimate downward for the fourth quarter.

In fiscal 2009, Lockheed Martin earned $7.78 per share, beating the Zacks Consensus EPS Estimate of $7.59 but falling behind the fiscal 2008 EPS of $7.86. For fiscal 2010, the current Zacks Consensus EPS Estimate is $7.42, with estimates clearly on the rise. Over the last 30 days, four analysts raised their estimates. Also the company raised its fiscal 2010 EPS guidance range to $7.15 – $7.35, from its previous guidance range of $7.05 – $7.25.

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