Lockheed Martin's Profit and Sales Fall Short of Expectations

Lockheed Martin Corp. lowered its full-year profit expectations Tuesday, as the company's latest quarterly earnings and sales fell short of guidance.

Shares slipped 3% to $268 in premarket trading.

As the world's largest defense company by sales, and the first to report this quarter, Lockheed Martin is considered an industry bellwether. The company has also been in the public spotlight lately as it has grappled with President Donald Trump during his early days in office.

The company knocked a dime off its per-share earnings forecast for the year, though it also shifted its sales outlook upward by $100 million. Lockheed Martin now expects earnings of $12.15 to $12.45 a share on $49.5 billion to $50.7 billion in sales.

In all for the quarter ended in March, Lockheed Martin reported earnings of $763 million, or $2.61 a share a share, down from $898 million, or $2.91 a share, a year earlier. Revenue rose 6.6% to $11.06 billion. The company said certain charges dented earnings by 39 cents per share.

Analysts were looking for per-share earnings of $2.79 on $11.23 billion in sales.

Sales in Lockheed's aeronautics business, the largest contributor to the company's top line, jumped 8%, driven by higher sales in its F-35 program.

The results also weighed down shares of peers Raytheon Co. and General Dynamics Corp. premarket in light trading.

Lockheed stock had gained 11% so far this year through Monday's close.

Write to Imani Moise at imani.moise@wsj.com

Lockheed Martin Corp. said Tuesday it booked almost $200 million in charges on two Middle East contracts in a move that highlights the potential pitfalls of the overseas deals that have been driving growth for U.S. defense contractors.

The world's largest defense company by sales took charges on a new missile-defense system being developed for the United Arab Emirates and an Abu Dhabi-based aircraft maintenance joint venture, ending a multi-quarter run of forecast-beating earnings.

Lockheed generated 27% of its revenue from overseas deals last year and aims to raise this toward 30%, with prospective sales including F-16 fighter jets for Bahrain and India.

Overseas defense budgets have generally been growing faster than Pentagon spending, especially in the Middle East and Asia, and investors have recently grown more cautious about the upward trajectory of domestic outlays under President Donald Trump.

Marillyn Hewson, Lockheed's chief executive, acknowledged the dent to the company's first quarter earnings from the $184 million in Middle East charges, but said she remained optimistic both ventures could still trigger future sales growth.

The company knocked a dime off its per-share earnings forecast for the year, though also boosted its outlook for sales and cash flow.

Crucially, Lockheed still expects profit margins on its F-35 combat jet to continue rising, even as it pursues an effort to cut the cost of the most popular model to $80 million over the next several years.

President Trump criticized the F-35's cost last year, though efforts to cut the price through productivity measures have trimmed it to about $95 million apiece.

Lockheed has accepted a contract for one batch of the jets imposed by the Pentagon last year, and after closing a second deal in February, aims to reach agreement on a third batch by the third quarter.

The F-35 is central to Lockheed's growth plans, and a follow-on multiyear deal for 440 jets could be worth more than $30 billion, one of the largest-ever defense sales.

Lockheed shares dipped following the earnings report, having reached an all-time high on Monday.

The company now expects earnings of $12.15 to $12.45 a share this year on $49.5 billion to $50.7 billion in sales.

For the quarter to March 31 it reported earnings of $763 million, or $2.61 a share a share, down from $898 million, or $2.91 a share, a year earlier. Revenue rose 6.6% to $11.1 million.

Boeing Co., General Dynamics Corp. and Northrop Grumman Corp. all report earnings Wednesday, with Raytheon Co. -- the most exposed to export markets -- following on Thursday.

--Imani Moise contributed to this article.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

April 25, 2017 13:28 ET (17:28 GMT)