Earnings Preview: Lockheed Martin Corporation

Lockheed Martin Corporation (LMT) is expected to report Q2 earnings before market open Tuesday, July 22, with a conference call scheduled for 11:00 a.m. ET.

Guidance

Analysts are looking for EPS of $1.88 on revenue of $10.86B. The consensus range is $1.80 to $1.95 for EPS, and $10.67B to $11.02B for revenue, according to First Call. Lockheed Martin gave FY08 EPS and revenue guidance when it reported its Q1 earnings. The company raised FY08 EPS view to $7.15 to $7.35 from $7.05 to $7.25 vs. consensus of $7.47.

The company also expects FY08 revenue of $41.8B to $42.8B vs. consensus of $42.84B. Lockheed Martin has benefited in recent years from expansive Pentagon spending on big new weapons systems and the wars in Iraq and Afghanistan, providing healthy quarterly earnings for the company, often beats expectations. The company won a big contract in the quarter when it beat out Boeing (BA) for a $3.57B satellite contract.

The company will build up to 12 new global positioning satellites as part of the Pentagon's new GPS program. The Coast Guard also accepted the company's first ship under a multi-billion dollar fleet modernization, a program that has been plagued by delays and cost overruns. The federal agency said it would stop its pursuit of a $96.1M refund for faulty ships built by Lockheed Martin and Northrop Grumman (NOC), though the Justice Department is still reviewing the case.

The company's aerospace division that makes fighter jets, transport planes and other aircraft, has seen a slowdown in recent quarters as the company makes a planned shift from F-16 production to the new F-35 stealth plane.

Analyst Views

Citigroup said on July 10, it recommends buying Lockheed Martin, Raytheon (RTN), L-3 Communications (LLL) and United Technologies (UTX) ahead of the quarter as it believes the recent weakness presents buying opportunities. The firm expects these companies to beat consensus estimates and raise guidance.

Am Tech stated on July 18 that it expects the company to report stronger than expected Q2 results. The firm notes that the company has beaten consensus estimates by an average of 8% over the last 14 quarters, and they expect the company to raise its guidance. The firm still believes that long-term trends for defense spending are favorable, and it expects Lockheed Martin to benefit from these trends. The firm maintained its Focus List Buy rating.