Lockheed, Boeing and United Technologies report mixed defense earnings

Defense companies report mixed earnings

WASHINGTON — Defense contractor Lockheed Martin Corp. reported an 18 percent drop in first-quarter earnings, part of mixed results Wednesday from some of the Pentagon’s biggest weapons suppliers.

The defense industry has until recently been a reliable source of profit growth, fed by steadily growing Pentagon spending over the last decade. But with the recent recession and a new Defense Department focus on keeping costs under control for expensive weapons, contractors are posting more modest profits than in the past.

Along with Lockheed, Boeing Co. said its defense and space unit profits dropped 6 percent while the military divisions of the conglomerate United Technologies Corp. reported some gains.

Most of Lockheed’s profit decline was due to effects of the recent U.S. health care overhaul, which did away with a Medicare-related tax benefit. Lockheed said it took a $96 million, or 25 cents per share, charge because of the legislation passed in March. It also lowered its 2010 outlook by 15 cents to between $7 to $7.20 per share because of the new law.

The world’s largest defense contractor also reported lower profits in three of its four operating divisions, including its marquee aeronautics unit that makes fighter jets and military transport planes.

Sales grew 5 percent on a growing amount of work on the F-35, which is expected to join the Pentagon’s fighter fleet soon. But profit slipped on the wind-down of the pricey F-22 jet, a program that was capped last year by Defense Secretary Robert Gates at lower levels than originally planned.

Lockheed earned $547 million, or $1.45 per share, down from $666 million, or $1.68 per share a year ago. The first-quarter results included a 10-cent gain from higher investment income.

Revenue rose 3 percent to $10.64 billion from $10.37 billion.

The results still beat Wall Street profit forecasts of $1.34 per share and were in line with revenue estimates of $10.61 billion, according to a survey by Thomson Reuters.

United Technologies, which includes the Sikorsky Aircraft helicopter division and the Pratt & Whitney jet engine maker, reported 20 percent growth in first quarter profit. Much of that was due to gains in its elevator division, air conditioner and heating unit, and its fire and security business.

The company said Sikorsky posted a 25 percent rise in operating profit due to strong military orders. Pratt & Whitney’s revenue and profit fell, largely because of fewer business jet engine deliveries.

The conglomerate earned $866 million, or 93 cents per share, in the quarter. That was higher than analysts’ forecasts, and helped United Technologies raise the lower end of its 2010 outlook to $4.50 per share from $4.40 per share.

Meanwhile, Boeing Co., which gets nearly half of its revenue from defense and space work, said the profit for that division fell 6 percent to $664 million. Sales of military aircraft were a bright spot, rising 6 percent to $3.2 billion on better sales of the F-18.

The defense industry is adjusting to shifting priorities and a greater focus on costs at the Pentagon after a decade of steady growth in defense budgets.

Gates has shown a willingness recently to cut or scale back big programs, such as Boeing’s missile defense and Army modernization work and the F-22 program led by Lockheed. During the first quarter, the defense secretary decided to withhold $614 million in performances bonuses from Lockheed over cost overruns and delays with the huge F-35 program.

Lockheed also lost a contract last year to build new helicopters for the president. But the company said this week that it will team with Sikorsky to make another bid for the project.

Lockheed Martin shares rose $1.28 to close at $86.25, while Boeing shares gained $2.75, or 3.9 percent, to close at $74.16. United Technologies shares gained $2.73, or 3.7 percent, to close at $76.93.

AP Business Writers Stephen Singer in Hartford and Joshua Freed in Minneapolis contributed to this report.