Lockheed Martin lowered its earnings forecast for 2017 after its first-quarter profit missed analysts’ estimates for only the third time this decade despite increased sales and profit in the Fort Worth-based aeronautics division.
The first-quarter results were clipped by $184 million in charges related to international sales and investments, Lockheed said in a statement Tuesday. The biggest drag came from an $120 million charge recorded by the company’s rotary and missions systems unit to design, integrate and install an air missile defense system for an international customer.
Aeronautics sales, bolstered by the F-35 program, increased 8 percent to $4.11 billion as Lockheed delivered 15 fighter jets in the quarter. Aeronautics division profit grew by 4 percent to $436 million.
Overall, first-quarter earnings from continuing operations were $2.61 a share, Lockheed said, lagging the $2.79 average of analyst estimates compiled by Bloomberg. Net sales of $11.1 billion were less than the $11.2 billion expected by analysts.
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The results caught investors off guard for a second consecutive quarter, sending shares down the most since the Bethesda, Md.-based company reported earnings in January. Shares (ticker: LMT) dropped $6.19 a share, or more than 2 percent, to $270.02.
Lockheed predicted earnings this year will be $12.15 to $12.45 a share, 10 cents less than it had forecast in January. Analysts had estimated $12.59 a share.
Investors have wondered whether the defense company will be able to maintain margins for the F-35, its largest source of income, with President Donald Trump fixated on the program’s expense. Trump criticized the jet’s costs as “out of control” late last year and suggested an upgrade of Boeing’s Super Hornet as a possible replacement for some Navy models of the F-35, prompting a review by U.S. Defense Secretary James Mattis.
Adding to the concerns: Bloomberg News reported Tuesday that the Pentagon’s contract management agency estimates that the company will actually deliver nine fewer Joint Strike Fighters than the company’s current forecast of 66 planes.
Lockheed hammered out an overall agreement for the F-35’s ninth, 10th and 11th production batches during extended negotiations with the Pentagon, Chief Executive Officer Marillyn Hewson told analysts Tuesday. The company agreed to drop its challenge to contract terms imposed by the Defense Department and gained improved cash payment terms for all three lots.
The company expects to conclude talks for the 11th and largest batch of F-35s during the third quarter.
This article includes material from Bloomberg News and the Star-Telegram archives.