Lockheed Martin Corp. on Tuesday announced net sales of $11.6 billion and net earnings of $1.1 billion for the third quarter of 2016. Net sales increased from $10.1 billion and net earnings from $756 million over the same quarter of 2015.
Earnings per share spiked from $2.42 in third-quarter 2015 to $3.61 in the corresponding period ending on Sept. 25, 2016.
The company noted that on Aug. 16 it completed divestiture of its Information Systems & Global Solutions (IS&GS) business segment, which merged with Leidos Holdings Inc. That resulted in a net gain of $1.2 billion for Lockheed, which represented the fair value of the shares of Lockheed common stock tendered and retired as part of the offer, plus a special cash payment, less the net book value of the business segment and other adjustments.
Marillyn Hewson, Lockheed president and CEO, said during a Tuesday earnings call that the successful completion of the IS&GS transaction “generated the highest value creation benefits to our stockholders and allows us to focus even more intensely on our remaining core [Defense Department] portfolio.”
Shortly after the divestiture, the National Nuclear Security Administration awarded to Lockheed subsidiary Nevada Site Science Support and Technologies Corp. (NVS3T) the management and operations contract for the Nevada National Security Site. The contract was valued at up to $5 billion over 10 years for management of the former nuclear testing site that now supports national security operations through nuclear stockpile stewardship and nonproliferation activities.
However, less than a week later, the NNSA rescinded the new contract after learning that ownership of NVS3T had changed hands to Leidos, saying in a statement that the subsidiary “did not notify the NNSA contracting officer of the change in ownership and control as required by the request for proposal.”
The NNSA is now reconsidering all offers it previously received for the contract competition. Lockheed executives did not discuss cancellation of the M&O contract during the earnings call.
Lockheed subsidiary Sandia Corp. is the management and operations contractor for the Sandia National Laboratories until next April. The subsidiary is in Lockheed’s Space Systems division, one of the company’s four business segments. The NNSA plans to award a new contract for site management by the end of this calendar year. The agency offered no update to the process as of this week. Neither the company’s earnings report nor Lockheed executives leading the earnings call mentioned Sandia Corp.
Lockheed reported nearly $2.3 billion in net sales for Space Systems in the third quarter, up 3 percent from $2.2 billion in the same quarter of last year. The company attributed the change to net sales from the AWE Management Ltd. venture; in late August it increased by 18 percent its ownership interest in the venture, which is under contract with the United Kingdom’s Defense Ministry to operate the country’s nuclear deterrent program.
Lockheed also reported $450 million in operating profit for the division, up 70 percent from $265 million for the same time last year, largely from gains due to the consolidation of AWE.
The company’s current 2016 outlook adjusted for the IS&GS transaction includes approximately $46.5 billion in net sales and $5 billion in business segment operating profit.
The company said it expects its net sales in 2017 to increase by roughly 7 percent compared to this year, with a total business segment operating margin in an expected 10 to 10.5 percent range.