Lockheed Martin on Monday posted a loss in the fourth quarter due to a one-time negative tax impact but overall the company’s operating results were strong and earnings, after adjusting for the tax charge, easily beat analysts’ expectations.
The tax provision is related to tax reform legislation signed into law last December that companies say will result in more cash available beginning in 2018 to invest in their businesses and employees. For Lockheed Martin, the charge cleaved $1.9 billion, $6.80 earnings per share (EPS) off the bottom line in the fourth quarter.
As a result of the lower tax rate, and because of changes to tax law, Lockheed Martin said it will accelerate $3.4 billion in payments to its pension trust in 2018 that were expected across 2019 and 2020. Overall, the company will make $5 billion in payments to its pension plans this year, which covers required pension contributions until 2021.
Hewson said the company increase capital expenditures and research and development spending this year by a combined $200 million, building on record spending in both areas in 2017, to execute business and develop technologies for long-term growth. Capital expenditures were nearly $1.2 billion in 2017.
The net loss in the quarter was $642 million ($2.25 EPS) versus net income a year ago of $988 million ($3.35 EPS). Excluding the tax provision and results from discontinued operations, adjusted net income was $1.2 billion ($4.30 EPS), with the per share results topping consensus expectations by 23 cents.
Sales in the quarter increased 10 percent to $15.1 billion from $13.8 billion a year ago.
For all of 2017, sales increased 8 percent to a record $51.5 billion from $47.2 billion a year ago and net income slipped to $2 billion ($6.89 EPS) from $5.3 billion ($17.49 EPS). Hewson said sales for the F-35 program were up 18 percent. Adjusting for the tax provision and results from discontinued operations, net income would have been $3.8 billion ($13.33 EPS).
Sales in 2018 are forecast to rise upward of about 2 percent to a range of between $50 billion to $51.5 billion. New accounting rules are in effect this year and, if applied to 2017 results, sales last year would have been $50 billion. Operating earnings are forecast to be slightly higher and the company also expects some pension benefits and lower taxes, leading to per share earnings between $15.20 and $15.50 EPS.
Cash from operations, before capital expenditures, is expected to be at least $3 billion in 2018, higher than an earlier forecast, due to a refund coming from the accelerated pension contributions and fewer taxes that will have to be paid due to the new law, Tanner said.
Free cash flow for the year was $5.3 billion and backlog at the end of 2017 stood at $99.9 billion versus $96.2 billion a year ago.
