Lockheed Martin Corp, the Pentagon's biggest supplier, forecast 2013 earnings growth above analysts' estimates as it expects a record backlog and continued efforts to cut costs to overcome an anticipated weakening of sales.
Lockheed said on Thursday that earnings per share had dropped 19 percent to $1.73 in the fourth quarter from $2.14 a year earlier, reflecting a large noncash pension adjustment, higher income tax expenses and a charge for job cuts in its aeronautics division.
Excluding the increase in income tax expense, Lockheed earned $1.91 per share, beating the consensus view of analysts polled by Thomson Reuters I/B/E/S, who had forecast $1.82 per share.
Lockheed said it expected earnings per share to rise to between $8.80 and $9.10 in 2013 from $8.36 in 2012.
The company is assuming the U.S. Congress will avert $500 billion in additional Pentagon spending reductions known as "sequestration" that are due to take effect over the next decade, starting in March.
Chief Financial Officer Bruce Tanner told reporters on a conference call that it remained unclear how any additional cuts to the U.S. defense budget would be implemented, which made it difficult to forecast the coming year's results.
Chief Executive Officer Marillyn Hewson, who took over on Jan. 1, told reporters the company's results in 2012 were "extraordinary" but that Lockheed remained focused on cutting costs and ensuring performance on key contracts.
Lockheed said fourth-quarter sales fell slightly to $12.1 billion from $12.21 billion.
The company said it expected sales of $44.5 billion to $46 billion this year, down from $47.18 billion in 2012, but Hewson said there were no additional workforce reductions in the works at this point.
Shares of Lockheed were down 1.9 percent at $94.23 in morning trading.
Rob Stallard, analyst with RBC Capital Markets, said it was a good quarter for Lockheed, with its longer-cycle equipment portfolio offsetting sharper revenue declines in its shorter-cycle information services division.
He said the company's 2013 outlook for operating profit and earnings per share had also beaten analysts' expectations.
Hewson told reporters the company's F-35 Joint Strike Fighter program was progressing "very well," and she expected to finalize agreements for sixth and seventh production orders with the Pentagon in the first half of 2013.
Hewson acknowledged that the F-35 fighter used similar lithium-ion batteries as those being investigated on Boeing Co's 787 Dreamliner, but said the company saw no problem since the F-35 equipment was made by a different manufacturer and had been tested and vetted extensively.
She said investigators were still trying to determine what caused a problem that prompted the Pentagon to ground the U.S. Marine Corps variant of the F-35 last week and that it was too soon to predict any effect on the flight test program.
Lockheed said three of its five divisions had reported higher sales and operating profits for the fourth quarter, but the space systems and information systems divisions posted lower profits and sales.
The company said sales and earnings in the information systems and global solutions business were hit by a continuing downturn in federal information technology budgets and the impact of a continuing resolution that took effect Oct. 1 and which bans new program starts. Sales fell 14 percent in the quarter, while earnings dropped 20 percent, the company said.
The space systems business also saw sales and earnings fall in the fourth quarter.