Lockheed Martin raises amid US defense cuts

Lockheed Martin supported the continued robust health of many large US defense contractors when it announced a 10% increase in second-quarter net earnings and increased its guidance for the full year despite ongoing spending cuts. Lockheed, the world’s biggest military contractor by sales, announced that net earnings for the three months to June 30 rose to $859 million from $781 million in the second quarter last year, despite a 4% decline in net sales to $11.4 billion. Profit rose at the Lockheed divisions that make missiles and provide training and logistics services, while it fell at the aeronautics unit.

The report showed how the biggest contractors working on the biggest deals continue to be largely shielded from the effects of the sequestration spending cuts that came into force on March 1. The legislation demands that the US defense department slash all budgets by about 10% each – but the biggest, most complex projects continue to run from funding allocated as long as eight years ago, so the effects so far have been compensated.

“Even in an uncertain budget environment, our portfolio of products and capabilities, robust cash generation, and outstanding performance by our 116,000 employees, continue to deliver value to our customers and shareholders,” Marillyn Hewson, chief executive, said for The Financial Times.

Lockheed Martin is the main contractor building the F35 aircraft, the fighter due to become the basis of the US air force, navy and marines, which is expected eventually to cost $1.5 trillion.

The CEO Marillyn Hewson said the company is making “good progress” in negotiations with the Pentagon about the next two lines of F-35 fighter jets and hopes to seal a deal in the near term.

Lockheed is building three models of the F-35 for the U.S. military and eight international partner countries – Britain, Australia, Canada, Norway, Turkey, Italy, Denmark and the Netherlands.