Lockheed Martin posted impressive results beating estimates for earnings and revenues. However, budget cuts pose a risk for one of the world's largest defense contractors
(OPENPRESS) Lockheed Martin Corporation (LMT) announced results for the third quarter of fiscal year 2013 (3QFY13) on October 22, before the stock market opened for trading. Earnings per share (EPS) were $2.66, a 20.36% year-over-year (YoY) improvement. Revenues fell 4% YoY to $11.35 billion but operating margins crept up 0.7 percentage points to 11.05%. This helped operating profits grow 10.6% YoY from $1.13 billion to $1.25 billion.
Segmented Earnings
Aeronautics
The Aeronautics segment showed a 2% YoY decline in revenues due to falling sales. Just nine F-16 fighter jets were delivered in the first three quarters of the year, less than a third of the 29 jets delivered in the comparable period last year. And only 19 C-130J military aircraft were delivered, down from 25 aircraft deliveries for the same period last year. F-22 Raptor sales were also down $160 million. However, these declines were partially offset by $165m in F-35 sales. They were also partially offset by the 0.1ppts (percentage points) increase in operating margins to 11.3%.
Information Systems & Global Solutions
The revenues of the Information Systems & Global Systems division decreased 10.2% to $2.06 billion, causing profits to dip 10.5% to $187 million. The decline was a result of decreased sales in projects like En Route Automation Modernization, an air traffic control system. These lost sales were slightly offset, however, by the start of programs like the Antarctic Support Contract to assist with research on the continent. Operating margins stayed flat at 9.1%.
Missiles and Fire Control
Net sales increased 3% YoY, because of high net sales from THAAD or Terminal High Altitude Area Defense, an anti-ballistic missile system, and Patriot Advanced Capability-3 missiles. Sales of technical service programs were $50 million lower compared to last year. Operating profits rose 18.66% to $356 million, aided by a 2.4ppts improvement of operating margins to 17.8%.
Space Systems
Sales of Space Systems decreased 5% YoY from $2.06 billion to $1.95 billion, primarily due to a $75 million decrease in revenues from NASA'S Orion Multi-purpose Crew Vehicle program, and a $25 million drop in revenues due to the decrease in net sales from government satellite programs. Operating profit fell 9% YoY as operating margins declined 0.6%.
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Exxon Earnings Beat Street Estimates
Exxon Mobil Corporation (XOM) more than made up for the disappointing results in the previous quarter when it beat estimates and announced $112.4 billion in revenues for 3QFY13. This was a significant turnaround for the company which had recently announced its worst ever results since 2010.
Earnings from its Upstream segment noticeably improved on both a year-over-year (YoY) and quarter-over-quarter (QoQ) basis. The segment performed better because global oil pricing benchmarks like the price of Brent crude oil increased during 3QFY12. Exxon is also increasing its exposure in liquid production to capitalize on high crude oil prices and upstream volumes also increased 1.5% YoY.
The decline in refining and marketing margins is a cause for concern and hit earnings but the possible impact was partially offset by an increase in volumes in 3QFY13. The Dartmouth refinery, which is being converted into a marine terminal, remained functional over the quarter, which also contributed to the higher refining volumes.
Exxon's Chemicals business was the highest growing segment in the previous year. Margins as well as volumes have improved compared to the previous quarter and the previous year's same quarter.
Management also stated that in its earnings call that capex for FY13 was in accordance with guidance. The company's cash balance over the quarter rose by $700 million to $5.7 billion. This indicates Exxon's ability to keep on paying dividends and also continue its share buyback program. Dividend paid out by Exxon this quarter was $2.8 billion and the company also bought back 34 million shares worth $3 billion.
