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Lockheed Martin (LMT) Beats on Q1 Earnings, Backlog Drops

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Pentagon’s prime defense contractor, Lockheed Martin Corp. (LMT - Free Report) reported first-quarter 2017 earnings from continuing operations of $3 per share, beating the Zacks Consensus Estimate of $2.76 by 8.7%. Earnings came in line with the year-ago period’s bottom line figure.

 

 

 

Operational Highlights

In the reported quarter, total revenue came in at $11.06 billion, missing the Zacks Consensus Estimate of $11.26 billion by 1.8%.

However, the company’s revenues increased 6.6% from $10.37 billion a year ago. Notably, all segments registered year-over-year growth in sales.

Lockheed Martin Corporation Price, Consensus and EPS Surprise

Lockheed Martin Corporation Price, Consensus and EPS Surprise | Lockheed Martin Corporation Quote

Backlog

Lockheed Martin ended the first quarter (on Mar 26, 2017) with $93.5 billion in backlog, down 2.8% from $96.2 billion at 2016-end. Of this, the Aeronautics segment accounted for $32 billion while Rotary and Mission Systems contributed $27.5 billion. Also, $19.5 billion came from Space Systems and $14.5 billion from Missiles and Fire Control.

Segmental Performance

Aeronautics: Sales increased 8% year over year to $4.1 billion, driven by higher net sales for the F-35 as well as F-16 programs.

Operating profit also advanced 4% year over year to $436 million, while operating margin dropped 50 basis points (bps) to 10.6%.

Missiles and Fire Control: Quarterly sales improved 4% year over year to $1.5 billion due to higher sales for fire control programs as well as air and missile defense programs.

Operating profit dropped 0.9% year over year to $219 million and operating margin contracted 70 bps to 14.7%.

Rotary and Mission Systems: Quarterly sales of $3.1 billion increased 3% from the prior-year quarter on higher revenues from Sikorsky.

Operating profit declined 53% year over year to $108 million, while operating margin contracted 410 bps to 3.5%.

Space Systems: Sales increased 11% year over year to about $2.4 billion in the first quarter, driven by sales improvement owing to the company’s increased interest in Atomic Weapons Establishment Venture.

Operating profit increased 18% to $288 million while operating margin improved 70 bps to 12.2% in the quarter.

Financial Condition

Cash and cash equivalents were $2.22 billion as of Mar 26, 2017, compared with $1.84 billion at the end of 2016. Long-term debt was $14.28 billion, almost in line with the 2016-end level.

Cash from operations at the end of the first quarter remained flat at $1.67 billion, compared to 2016-end level.

During the quarter, the company repurchased 1.9 million shares for $500 million compared with the buyback of 2.4 million shares for $501 million a year ago. The company paid dividends worth $544 million to its shareholders, compared to the year ago period’s level of $533 million.

Guidance

For 2017, Lockheed Martin has revised its financial guidance. The company expects to generate revenues in the range of $49.5–$50.7 billion, higher than the earlier provided projection of $49.4–$50.6 billion.

On the bottom-line front, the company now expects its earnings per share to be in the range of $12.15–$12.45 during 2017, lower than the earlier announced guidance of $12.25–$12.55.

The company has also raised its 2017 expectations for cash from operations. Lockheed Martin projects to generate more than $6 billion cash from operations, compared to earlier projection of more than $5.7 billion.

Zacks Rank

Lockheed Martin carries a Zacks Rank #2 (Buy).

Upcoming Peer Releases

Northrop Grumman Corp. (NOC - Free Report) is expected to report first-quarter 2017 results on Apr 26. The company has an Earnings ESP of +1.03% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Leidos Holdings, Inc. (LDOS - Free Report) is expected to report first-quarter 2017 results on May 4. The company has an Earnings ESP of +1.28% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Boeing Company (BA - Free Report) is expected to report first-quarter 2017 results on Apr 26. The company has an Earnings ESP of +0.52% and a Zacks Rank #3 (Hold).

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