Major Defense Contactors Post Mixed Results

by: Matthew Potter
January 28, 2011

Category: Boeing, Business Line, Companies, Congress, Contract Additions, Contract Awards, Department of Defense, development program, Earnings, Events, Federal Budget Process, General Dynamics, IT, Lockheed Martin, logistics, Military Aviation, missile defense, northrop grumman, Northrop Grumman Corp., production program, Raytheon, Services, U.S. Air Force, U.S. Army, U.S. Marine Corps, U.S. Navy | RSS 2.0

The latest quarterly earning reports are starting to come out from the big United States defense contractors and they have had mixed results. In many cases earnings and revenues are down although profits have been steady. Boeing (BA) due to issues with its commercial aviation side had a drop and did not perform as well as its peers.

Due to the ongoing delays with the 787 advanced airliner and the 747-800 transport aircraft both of which continue to have delayed entry into service as well as some declines in defense business Boeing reported an eight percent decrease in earnings. They were only about $1.16 billion or a decline of over $100 million from the previous year’s quarter. Revenue also dropped a similar amount to $16.55 billion. Boeing’s guidance for the full year is now below analyst expectations.

General Dynamics (GD) on the other hand had a banner quarter. Profits and earnings increased almost twenty percent. Much of this was driven by demand for their commercial Gulfstream corporate jets. The company also said that for the year earnings would improve over sixty cents a share.

Raytheon (RTN) also announced improved results. Earnings were higher then projected at $1.47 a share much higher then the estimated $1.16 although net income were down about five cents at $1.25. Even so the company is projecting that annual results will be slightly higher then last years. Sales in the quarter were up slightly to almost $7 billion.

Lockheed Martin (LMT) the lead contractor for the struggling Joint Strike Fighter (JSF) program which has seen delays and cost adjustments by the Defense Department posted mixed results. Revenue was up but earnings down slightly but missed analyst’s projections. Lockheed was helped by the award of the LCS contract for up to ten ships. The company predicts that 2011 annual earnings will be almost a dollar below 2010.

Northrop Grumman (NOC) has delayed its earning announcement a week until 9 February. Read into that what you may and in the same announcement Northrop reiterated its desire to separate its shipbuilding division from the main company.

Results were rather a mixed bag and depended upon the balance between commercial and defense products and recent awards by the military. The long term trend though seems to be slow growth if not almost stagnant. The continuing use of CRA right now is affecting the U.S. Defense Department’s ability to award new contracts or increase funding to existing programs. Secretary of Defense Robert Gates has referred to this as a “crisis” and needs Congress to get the 2011 budget passed. This means that some major contracts will be pushed into the second half of 2011 which could seriously impact annual revenues for this year.

The defense industry continues its boom-or-bust cycle and 2011 on out may be a down year overall although several companies stocks are at or close to recent highs.

Photo from Bob the courier’s flickr photostream.

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