Strong Quarter Prompts Lockheed Martin To Raise Space Profit Target for Year
PARIS — Lockheed Martin on April 21 said its Space Systems division reported a double-digit increase in operating profit for the three months ending March 29 compared to the same period last year.
The first-quarter performance caused the company to raise its full-year Space Systems profit target despite the fact that the division’s overall revenue target was left untouched and that much of the first-quarter performance came from government launch service provider United Launch Alliance of Denver and will drop later this year.
Bethesda, Maryland-based Lockheed and Chicago-based Boeing each own a 50 percent equity stake in ULA. Both companies receive quarterly cash earnings from the launch vehicle builder and operator.
For the first three months of 2015, Lockheed reported ULA earnings of $75 million, equivalent to 26 percent of Space Systems’ total operating profit of $288 million. A year earlier, Lockheed reported ULA earnings of $70 million.
In a conference call with investors, Lockheed Chief Financial Officer Bruce L. Tanner said ULA’s payments for the remaining three quarters of the year will not be as large. He said full-year ULA earnings to Lockheed will likely be around $160 million to $170 million.
The Space Systems division reported revenue of $1.954 billion for the three months ending March 29, up 5 percent over the same period a year ago. But the $288 million in operating profit was up 13 percent year on year, giving the division an operating margin of 14.7 percent versus 13.7 percent a year ago.
On the revenue side, the company said its Orion crew-transport vehicle for NASA, now in development, generated $105 million more in revenue for the quarter than a year ago and an additional $15 million in operating profit.
The added profit was from both a higher volume of work on Orion this year, and the fact that Lockheed Martin was able to eliminate development risk in the program following a successful first unmanned test flight.
“We finalized the results of that [test flight] in the first quarter and trued up our booking position, if you will, for that event,” Tanner said during the conference call. “That resulted in a step-up [in profitability] that will not repeat in the next three quarters.”
An additional $20 million in profit during the quarter came from government satellite programs that passed milestones that allowed the company to book earnings from reliability incentive payments.
The company said unspecified acquisitions it made in 2014 accounted for $90 million in Space Systems revenue in the first three months of 2015.
The performance of Orion and the unnamed government satellite programs allowed Lockheed to raise its forecast of the Space Systems division’s operating profit by $30 million, to between $900 million and $930 million. The division’s revenue forecast for the year remained at $7.5 billion to $7.8 billion.
“The Space Systems division is performing very well right now and we’re performing very, very well on our government contracts,” Tanner said. “There are a lot of incentive-based contracts there, where if we do well we obviously get the margins associated with that.”
Most, but not all, of Lockheed’s space-related business is in the Space Systems division. A notable exception is the company’s $914 million contract to build a ground-based space-surveillance radar for the U.S. Air Force, a contract won last year by Lockheed’s Mission Systems and Training division.