The Wall Street Journal-20080125-Earnings Digest- Defense Firms Foresee Healthy Growth in 2008
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Earnings Digest: Defense Firms Foresee Healthy Growth in 2008
Some aerospace-company executives said they expect healthy earnings growth this year, amid robust defense spending and strong world-wide demand for commercial aircraft.
Reporting solid results for the quarter just ended, Lockheed Martin Corp. and Rockwell Collins Inc. raised their outlook for this year's earnings. Northrop Grumman Corp. reported net income that was flat with last year.
Bruce Tanner, chief financial officer at Lockheed, said "there's no huge risk" for Lockheed's defense contracts, even if the U.S. government looks to trim some spending. Much of Lockheed's business is on long-term contracts to replace much-needed military equipment, such as new jet fighters.
Even more bullish, Rockwell CEO Clay Jones said defense spending is likely to increase in the next few years, as politicians of all stripes are committed to updating the military and increasing the budget for national security. Mr. Jones said there has been no fallout among his customers from the credit-market meltdown or other economic worries.
Lockheed, Bethesda, Md., has warned that it expects sales in its largest division, aeronautics, to drop temporarily while it shifts from building older F-16 jets to new programs like the F-35 Joint Strike Fighter. But the company is still selling F-16s overseas, and the Pentagon indicated it may seek more of Lockheed's F-22 fighter jets to make up for the grounding of much of the Air Force's F-15 fleet due to structural problems.
Lockheed previously expected to see aeronautics sales fall by about $1 billion this year as the programs change over, but it now forecasts only about an $850 million drop.
Lockheed, which is also the biggest supplier of information technology to the U.S. government, sees no slowdown in that business, although some competitors have reported slower IT sales.
Rockwell Collins reported net income, for its fiscal first quarter ended Dec. 31, of $154 million, or 93 cents a share, up from $143 million, or 84 cents a share, a year earlier. Revenue rose 12% to $1.11 billion.
In 4 p.m. New York Stock Exchange composite trading, Rockwell Collins shares were up 5.2% at $61.50, while Lockheed Martin was up 4% at $105.90. Northrop Grumman shares slipped 1% to $77.44.
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Andrew Edwards contributed to this article.
