Profits for defense contractor Lockheed Martin Corp. fell nearly 6% in the first quarter as the company’s Missile and Fire Control (MFC) division loss ground in the first three months of fiscal 2015 due to continued cuts in defense spending by the Pentagon.
Still the Bethesda, Md.-based defense giant, which operates a 500-employee facility in Camden that handles production of several major missile and artillery systems for the U.S. Army and allied forces, remained upbeat with two giant Pentagon contracts on the horizon and it raised its operating profit and earnings per share outlook for the remainder of the year.
“Our team continues to deliver solid performance for our customers and strong results for our shareholders,” Lockheed Martin Chairman, President and CEO Marillyn Hewson said in a statement. “We remain focused on successfully competing in the global marketplace and delivering industry-leading affordable products and technologies to our customers.”
For the period ended March 31, 2015, the world’s top defense contractor reported net earnings of $878 million, or $2.74 per share, on sales of $10.1 billion. Those profit totals were off 5.9% from net earnings of $933 million, or $2.87 per share, in the first quarter of 2014.
Wall Street analysts had expected the global defense contractor to report profits of $2.50 a share on $10.3 billion in revenue, according to Thomson Reuters.
Of note in the first quarter report was that Lockheed’s MFC division saw a double-digit drop off in sales and profits. MFC’s net sales for the first quarter of 2015 decreased $364 million, or 19%, compared to the same period in 2014. The division’s first quarter operating profit of $292 was down by $66 million, or 18%, compared to the same period in 2014.
Company officials said the huge sales decline was largely due to fewer deliveries of tactical and air and defense missiles to the Pentagon, as well as fewer sales of fire control and precision targeting weaponry used by the nation’s armed forces.
The earnings report specifically drew out that $275 million in lower sales at the MFC division were due to fewer deliveries of Lockheed’s Patriot Advanced Capability-3 (PAC-3) missile and the Guided Multiple Launch Rocket System (GMLRS), both of which are produced at the defense contractor’s operations facility at Highland Industrial Park in Camden.
Still, Lockheed raised its earnings outlook by five cents to a range of $10.85 to $11.15 per share for the remainder of fiscal 2015, compared to $10.80 to $11.10 at the end of the fourth quarter. There was no change in revenue growth for the year, which is forecasted to fall within the range of $43.5 billion to $45 billion. Analysts surveyed by Thomson Reuters had forecasted full-year profits of $11.14 a share and $44.6 billion in revenue.
PENTAGON ANNOUNCEMENT ON $30 BILLION HUMVEE PROJECT STILL ON TAP
What could possibly change the trajectory of Lockheed’s sales and earnings is the Pentagon’s expected decision later this summer on the award of the final contract for a $30 billion Joint Light Tactical Vehicle (JLTV) project.
The JLTV is being developed by the U.S. Army and the Marine Corps as a successor to the High Mobility, Multi-Wheeled Vehicle (HMMWV), or Humvee. A Request for Proposal (RFP) was issued in January 2012 and the U.S. Army announced Lockheed Martin, Oshkosh and AM General as finalists for a 27-month pilot engineering and manufacturing program.
If Lockheed Martin wins the contract, the Maryland based defense giant has said it will perform final assembly of JLTV at its operations facility in Camden. The end result is a joint purchase by the Army and Marine Corps of nearly 55,000 of the next-generation Humvees. TB&P recently interviewed Lockheed Martin’s Camden Operations Site Director Colin Sterling about the project’s promise.
Still, Congressional in-fighting over the nation’s defense budget could throw a monkey-wrench into the plans for the next-generation Humvee, the same issue that cut into Lockheed’s first quarter sales and profit. Last month, the Marine Corps canceled plans to modernize its fleet of Humvees due to another round of across-the-board spending cuts possibly hitting the Corps’ budget in October, according to an article by the Marine Corps Times.
Now the Marines will likely make do with the fleet of aging vehicles until the first round of JLTVs are fielded in 2018, the article stated. The service will “assume the risk and sustain the remaining fleet of Humvees,” Bill Taylor, the program executive officer for Land Systems Marine Corps, told lawmakers during a hearing on Capitol Hill in late March.
Plans originally called for 6,700 Humvees to be upgraded. The Marine Corps was going to keep 18,500 of its 24,000 Humvees. They were going to replace 5,500 with JLTVs. The rest of Marine Humvees would be maintained through about 2030, according to documents published by Marine Corps Systems Command.
Besides the JLTV contract, Lockheed has teamed with Boeing Co. to bid on a contract to build a new long-range bomber for the Air Force worth over $80 billion. Northrop Grumman Corp. is also competing for that contract, which is also expected to be announced later this summer.
In Tuesday’s midday session on the New York Stock Exchange, Lockheed’s stock backed up 52 cents to $196.28 as nearly one million shares traded hands.