“WASHINGTON (Reuters) – Lockheed Martin Corp and Raytheon Co warned on Thursday that U.S.defense budget cuts would eat into their sales this year, but they forecast very different effects on their bottom lines.
Lockheed, the Pentagon’s biggest supplier, said it could cut enough costs that earnings would not only grow but also would exceed expectations. Raytheon, on the other hand, said its profit would shrink as the arms maker gets squeezed by the end of high-margin programs and the start of new, low-margin ones.
Their divergent fortunes illustrate the tough year ahead for defense contractors, which are uncertain about just how deeply the U.S. government plans to cut military spending to help rein in the soaring deficit.
Lockheed makes fighter jets, among other armaments, while Raytheon makes the Patriot missiles and other defense equipment.
Lockheed’s forecast assumes Congress will avert $500 billion in additional Pentagon spending reductions known as “sequestration” that are due to take effect over the next decade, starting in March.
But Lockheed still expects sales to contract as much as 6 percent this year, an even steeper slide than the decline of as much as 3 percent that Raytheon forecast.
Shares of both companies fell in morning trading, with Lockheed down 2.3 percent at $93.84 andRaytheon down 2.1 percent at $56.96.
BEAT EXPECTATIONS
Lockheed said earnings per share dropped 19 percent to $1.73 in the fourth quarter from $2.14 a year earlier, reflecting a large noncash pension adjustment, higher income tax expenses and a charge for job cuts in its aeronautics division.
Excluding those one-time items, the company earned $1.91 per share, beating the consensus view of analysts polled by Thomson Reuters I/B/E/S by 9 cents….”
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