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Defense Earnings Continue Good News (ITT, KBR, COL, OSK)

by: Matthew Potter
November 1, 2010

Category: Boeing, Business Line, Companies, Congress, Department of Defense, development program, Earnings, Events, ITT Corporation, KBR, Lockheed Martin, logistics, Military Aviation, Oshkosh Truck Corp, production program, Rockwell Collins, Services | RSS 2.0

As the latest reports of earning and profits have been coming in the last week defense contractors have reported decent growth in revenue and earnings. To date only Lockheed Martin (LMT) which saw a decline has been the only major company to report negatively. The latest reports from ITT Corporation (ITT), KBR (KBR), Rockwell Collins (COL) and Oshkosh (OSK) saw improvement.

At the same time most companies are being cautious in their future views due to concerns of future U.S. defense spending.

ITT Industries (ITT) who make radars, electronic and night vision systems as well as logistical and technical services for the Pentagon reported over one hundred percent improvement in income per share compared to last year with an increase of $0.46 cents a share. The company has increased their projection for the full year to $4.28 to $4.32 well over the analysts $4.08 to $4.18. Total revenue though was less then predicted at $2.64 billion. ITT also has a significant commercial side with a focus on pumps and water purification to aid them in balancing their defense products which did see a decline this quarter.

KBR Inc. (KBR) a leading provider of logistic and engineering services to the U.S. Defense Department as well as to the oil and construction industry reported an increase in earnings of $24 million. Revenue was reduced mainly due to the loss of the Logistics Civil Augmentation Program (LOGCAP) III contract. The U.S. Army manages the LOGCAP contracts for support in Iraq of military and civil services. KBR had worked on previous LOGCAP contracts but due to concerns expressed by the U.S. government with some of the charges and billings they were unable to bid on the latest iteration. Overall KBR expects to slightly exceed analysts expectations for the year.

Rockwell Collins (COL) who primarily provide avionics and electronic systems in support of defense programs also had a good quarter. The company also provides support to commercial aviation and saw significant business providing spare parts and retrofitting those type of aircraft. The company feels that it will meet predictions for annual earnings. There were some concerns expressed that the delay in awarding the U.S. Air Force’s KC-X new aerial tanker contract expected now to slip from this month to early next year may effect them as they are part of Boeing’s (BA) team.

Oshkosh Corp (OSK) who primarily had made construction and heavy equipment but recently had moved into the defense realm with two major contract wins in the last two years saw a drop in revenues and profit in the most recent quarter. The company had had bad years in 2008 and 2009 due to the decline in the U.S. economy affecting their sales. Recently the production of the MRAP-AT vehicle for use in Afghanistan and the FMTV truck for the Army and Marines had offset this decline in recent months. The company is saying that improved performance of the commercial side of their business will aid the company in the future. Both the MRAP and truck contracts have definitive ends as the military buys out vehicles to rebuild their inventories.

Defense contractors who also have a commercial component of their business seem to be doing the best as the latest results are announced. Boeing, Oshkosh, ITT and Rockwell all were able to strike a balance with these business lines. They may be able to offset future cuts to the U.S. defense spending but if the U.S. economy does not recover soon it may be a rough few years for these companies.

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One Comments

  1. Oshkosh Learns Some Hard Truths About Defense Contracting | Defense Procurement News on January 31st, 2011 3:01 am

    […] In 2009 the combination of these two contracts helped reduce the company’s losses. It was hoped that the improvement in the economy overall would help buoy commercial sales and soften the impact of any reduction in military business. […]

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