Lockheed, Northrop Soar in 2nd Quarter
Lockheed Martin Corp. and Northrop Grumman Corp., two of the biggest U.S. defense contractors, reported profits that soared beyond analyst expectations for the second quarter.
Earnings at Raytheon, the third-largest U.S. defense company, tumbled as it sold fewer missiles. Even so, Raytheon’s shares jumped 12% because the company did not disclose added problems for the first time in several quarters.
“The group in general is in a very favorable environment, given that the outlook for defense spending is improving,” said Peter Arment, an analyst at JSA Research Inc. in Newport, R.I.
Spending on defense research and development in the U.S. is expected to be about $41 billion in the fiscal year beginning in October.
Lockheed, the world’s largest defense contractor, rebounded from a year-ago loss as its Atlas and Titan rocket businesses recovered from several failed launches.
Profit from operations was $112 million, or 29 cents a share, compared with a loss of $29 million, or 8 cents, in the year-ago quarter. Sales were little changed at $6.21 billion.
Lockheed was expected to earn 21 cents, according to First Call/Thomson Financial.
The company is selling assets such as its defense-electronics business to cut costs and pare down its almost $12 billion in debt after a string of acquisitions in the 1990s.
“They seem to be getting everything under control,” said Todd Ernst, an analyst at Prudential Securities Inc., who has an “accumulate” rating on the stock.
Los Angeles-based Northrop said profit from continuing operations jumped 42% to $175 million, or $2.50 a share, beating the consensus forecast of $2.40, even as sales edged down 1% to $1.86 billion. Northrop benefited from higher pension income and a 57% jump in profit in its information-technology business, Logicon. The company also had better results in surveillance aircraft and fighters.
Raytheon’s profit from continuing operations dropped 66% to $95 million, or 28 cents, a penny better than expectations. Sales fell 9.7% to $4.12 billion.
Raytheon had warned three times in the past year that profit was below forecasts because of project delays, rising costs and falling missile sales. It’s selling assets and exiting businesses to cut costs and boost profit.
Lockheed shares rose $1.3/8 to close at $26.75, while Northrop rose $3.63 to close at $72.69 on the New York Stock Exchange.
Raytheon’s widely traded Class B shares jumped $2.50 to close at $23.44, also on the NYSE. The stock had slumped 72% in the last year.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
AIRLINES
* Delta Air Lines Inc.’s fiscal fourth-quarter profit rose 3.3%, to $376 million, or $2.86 a share, soaring beyond analyst forecasts of $2.72 a share, as the airline carried more passengers and kept rising fuel costs in check. Sales jumped 14% to $4.47 billion from $3.96 billion. Delta is the No. 1 U.S. transatlantic carrier.
* Northwest Airlines Corp.’s second-quarter profit rose 12% to $115 million, or $1.26 a share, well beyond analyst expectations of 98 cents, as the airline raised fares and carried more passengers. Revenue rose 13% to $2.93 billion.
DRUGS
* Alza Corp. said second-quarter profit rose 41% to $48 million, or 44 cents a share, including a $15-million upfront fee from Bayer Corp. for rights to a drug that Alza may be required to amortize. Net income would be $38 million, or 36 cents a share, if the fee had been deferred. That’s a penny higher than analyst forecasts.
* American Home Products Corp. said second-quarter profit rose 19% to $412.7 million, or 31 cents a share, matching forecasts, as it sold more medicines for depression and rheumatoid arthritis. Sales rose 16% to $3.19 billion.
* Bristol-Myers Squibb Co. said second-quarter profit rose 15% to $1.09 billion, or 54 cents a share, matching forecasts, as it sold more drugs for cancer and high cholesterol. Sales of Bristol-Myers’ biggest product, the Glucophage diabetes pill, rose 39% to $485 million.
* Eli Lilly & Co. said second-quarter profit rose 16% to $666.2 million, or 61 cents a share, a penny better than forecasts, as higher sales of its drugs for schizophrenia, cancer and diabetes offset a decline in Prozac sales.
OIL
* Tosco Corp., an oil refiner and operator of Circle K convenience stores, said profit surged 73% to $145 million, or 95 cents a share, a penny better than estimates, with help from higher gas prices. Sales jumped 52% to $5.59 billion.
* Valero Energy Corp. posted net income of $87.7 million, or $1.51 a share, far exceeding the estimate of $1.44, as it benefited from higher gas prices. In the year-ago quarter, the oil refiner lost $22.1 million, or 39 cents. Sales climbed 85% to $3.37 billion.
TELECOMMUNICATIONS
* BellSouth Corp.’s quarterly profit rose 9.4% to $1.06 billion, or 56 cents, in line with forecasts. Sales gained 9.8% to $6.75 billion, with data sales up 27%.
* SBC Communications Inc. said profit from operations was virtually flat at $1.92 billion, or 56 cents a share, versus $1.91 billion, or 55 cents, a year ago. Sales were up 9.8% to $13.2 billion, with data sales up 38%. * Sprint Corp. said second-quarter profit rose 4% to $470 million, or 53 cents, beating estimates of 49 cents. Sprint, which last week abandoned a plan to combine with WorldCom Inc., said revenue grew 4% on strong data sales. At the Sprint PCS wireless unit, losses narrowed as revenue doubled.
OTHER INDUSTRIES
* Allstate Corp.’s second-quarter earnings fell 29% to $432 million, or 58 cents a share, but beat analyst estimates of 56 cents. Allstate said strong growth in its life insurance and retirement savings businesses wasn’t enough to offset heavy storm losses.
* Avon Products Inc.’s second-quarter profit rose a slight 2.6% to $124.5 million, or 52 cents a share, on a 10% rise in sales to $1.38 billion.
* Colgate-Palmolive Co. said second-quarter earnings rose 15% to $261.9 million, or 42 cents a share, a penny better than estimates, as sales rose 2.3% to $2.34 billion.
* ITT Industries Inc. said second-quarter profit rose 11% to $70.2 million, or 78 cents a share, a penny above estimates, as sales of its switches and connectors used in mobile phones surged 41%. Total sales rose 3.1% to $1.22 billion.
* Gillette Co. said second-quarter profit from continuing operations edged up 2.1% to $296 million, or 28 cents a share, meeting forecasts, as sales rose 2% to $2.25 billion. The company, whose products include Duracell batteries and RightGuard deodorant as well as razors, also said it has decided to retain its Braun appliances unit. In February, Gillette said it was exploring a sale of the unit.
* Lear Corp., the world’s largest maker of automotive seats and interiors, said second-quarter earnings rose 19% to $88.7 million, or $1.33 a share, a penny better than forecasts, as strong sales of cars and trucks boosted demand for its products. Sales rose 16% to $3.76 billion.
* PG&E; Corp., owner of California’s largest utility, said second-quarter earnings from continuing operations rose 29% to $253 million, or 69 cents, well beyond the consensus estimate of 59 cents. PG&E; benefited from strong growth in its unit that operates power plants across the U.S. and trades energy. Sales rose 20% to $5.63 billion.
* Polaroid Corp.’s second-quarter profit jumped 39% to $20.5 million, or 45 cents a share, although its sales were virtually flat at $487.8 million. The earnings beat forecasts by a 1 cent.
* Quaker Oats Co. said second-quarter profit rose 14% to $153 million, or $1.11 a share, well beyond expectations of $1.06, on higher sales of Gatorade and other beverages. Revenue rose 6.1% to $1.40 billion.
* R.J. Reynolds Tobacco Holdings Inc. said second-quarter profit from continuing operations rose 9.2% to $107 million, or $1.05 a share, on higher cigarette prices, even as wholesalers placed smaller orders for its brands. Sales rose 9.3% to $2.09 billion. Analysts expected earnings of $1.05 a share.
* Textron Inc., the No. 1 U.S. maker of commercial helicopters and mid-size business jets, said second-quarter profit rose 11%, to $179 million, or $1.23 a share, 2 cents better than forecasts, led by higher sales at its aircraft and automotive businesses. Revenue rose 12% to $3.22 billion.
* Timberland Co., a maker of shoes and hiking boots, said second-quarter profit rose more than fivefold to $11.1 million, or 26 cents a share, from $2.1 million, or 5 cents, a year earlier, on expanded sales at home and in Asia. Sales surged 16% to $177.1 million.
* United Parcel Service Inc.’s second-quarter profit grew 18.2% to $695 million, or 60 cents a share, in line with forecasts. Revenue jumped 11% to $7.28 billion. But average revenue per piece fell in UPS’ international markets by 2%. Average revenue per piece rose 2% in the U.S. UPS also announced that it would impose a temporary 1.25% fuel surcharge on its customers next month to combat the impact of rising oil prices.
