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Lockheed (LMT) Tops Q2 Earnings & Revenues, Boosts View

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Pentagon’s prime contractor, Lockheed Martin Corp. (LMT - Free Report) , reported second-quarter 2016 earnings of $3.32 per share, surpassing the Zacks Consensus Estimate of $2.92 by 13.7%. Earnings also increased 12.9% from the year-ago level owing to higher deliveries of F-35 fighter jets as well as higher sales from its Sikorsky helicopter unit.

 

Operational Highlights

In the reported quarter, total revenues came in at $12.91 billion, beating the Zacks Consensus Estimate of $12.53 billion by 3%.

The company’s revenues also increased 10.9% from $11.64 billion a year ago. All segments, except Space Systems and Information Systems & Global Solutions, registered year-over-year sales growth.

Backlog

Lockheed Martin ended the second quarter (on Jun 26, 2016) with $96.4 billion in backlog, down 3.2% from $99.6 billion at 2015 end. Of this, a $28.8 billion share went to the Aeronautics segment while Mission Systems and Training accounted for $29.5 billion. The rest comprised $18.5 billion for Space Systems, $15.3 billion for Missiles and Fire Control, and $4.3 billion for Information Systems & Global Solutions.

Quarterly Segmental Performance

Aeronautics: Quarterly sales increased 6% year over year to $4.4 billion, mainly on F-35 production contracts and sustainment activities during the quarter.

Operating profit also advanced 8% year over year to $478 million and operating margin increased 20 basis points (bps) to 10.9%.

Information Systems & Global Solutions: Quarterly sales decreased 5% to approximately $1.33 billion. The decline reflects the impact of completion of certain programs and heightened competition.

However, operating profit came in at $151 million, up 41% year over year and operating margin expanded 370 bps to 11.3%.
 
Missiles and Fire Control: Quarterly sales increased 2% year over year to $1.7 billion. The increase reflects higher revenues related to SNIPER and Special Operations Forces Contractor Logistics Support Services as well as from air and missile defense programs.
 
However, operating profit decreased 14% year over year to $253 million and operating margin contracted 270 bps to 15.1%.

Mission Systems and Training: Quarterly sales of $3.3 billion increased 53% from the prior-year quarter. The growth primarily reflects higher revenues from Sikorsky.

However, operating profit decreased 23% year over year to $202 million and operating margin shrunk 600 bps to 6.1%.

Space Systems: Sales decreased 3% year over year to about $2.2 billion in the second quarter. The decrease reflects lower sales from various government satellite programs.

However, operating profit increased to $340 million from $294 million a year ago while operating margin expanded 250 bps to 15.3% in the quarter.

Financial Condition

Cash and cash equivalents were $1.27 billion at second-quarter end compared with $1.09 billion at 2015 end. Long-term debt almost remained on par at $14.307 billion with the 20156-end level of $14.305 billion.

Cash from operations in the second quarter was $1.47 billion compared with $1.26 billion in the year-ago quarter, up 16.6%.

During the quarter, the company repurchased 2.1 million shares for $501 million compared with 4.9 million shares repurchased for $937 million a year ago.

Guidance

Lockheed Martin raised its 2016 outlook with revenues expected to be in the range of $50 billion to $51.5 billion (earlier projection: $49.6 billion to $51.1 billion), earnings per share of $12.15–$12.45 (earlier projection: $11.50–$11.80) and operating profit of $5,725–$5,875 million (earlier projection: $5,625–$5,775 million).

Lockheed expects cash from operations of approximately $5.5 billion for the year (earlier projection: $5.4 billion).

LOCKHEED MARTIN Price, Consensus and EPS Surprise

LOCKHEED MARTIN Price, Consensus and EPS Surprise | LOCKHEED MARTIN Quote

Upcoming Peer Releases

The Boeing Co. (BA - Free Report) , General Dynamics Corp. (GD - Free Report) and Northrop Grumman Corp. (NOC - Free Report) are slated to report second-quarter 2016 results on Jul 27, before the opening bell.

Zacks Rank

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

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