Lockheed Martin (NYSE:LMT)
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Lockheed Martin Corp. (LMT) said that its earnings guidance for this calendar year was unlikely to be affected by the Defense Department's initial budget request for fiscal 2013, which is expected to be unveiled later Thursday.
The world's largest defense contractor by sales is trying to adjust its future size and shape in the face of uncertainty over military budgets at home and overseas that could include cuts to some big Pentagon weapons programs.
Lockheed Chief Executive Bob Stevens acknowledged a "new reality" for the defense industry in an era of greater fiscal constraint. He added, however, that company leadership was "greatly distressed" by sweeping, across-the-board cuts that would be imposed on the Defense Department if lawmakers do not make changes to a deficit-reduction deal that was passed last year.
"We think the impact on industry would be devastating" if the so-called sequestration cuts kick in, roughly doubling the nearly $500 billion in cuts over 10 years that have already been imposed on the Pentagon, Stevens said on a call with reporters.
Without changes to the deficit-reduction act, he said the industry would face facility closures, layoffs and loss of engineering expertise.
Bruce Tanner, Lockheed's CFO, said the changes that would be unveiled by the Pentagon in its new budget request would not likely affect the company's earnings guidance for 2012.
Potential impact to the company's bottom line from the Pentagon's revised plans, he said in the conference call Thursday, "will happen in 2013 and beyond."
Lockheed builds the F-35 stealth fighter, the Pentagon's costliest weapons program, and the Defense Department is expected to unveil a plan that may scale back near-term purchases of the aircraft, which has seen soaring cost projections and developmental delays.
Lockheed executives declined to comment on any changes ahead of the Pentagon's announcement, but Stevens said he expected long-term demand to buy the jets to remain steady, particularly when factoring in international orders.
David Wajsgras, Raytheon Co.'s (RTN) Chief Financial Officer, said the Obama administration's recent strategy shift, focusing U.S. military attention to the Pacific region, would continue to drive demand in areas such as missile defense and intelligence, surveillance and reconnaissance equipment.
Raytheon, the maker of the Patriot missile system, is "in the right priority areas," he said in an interview.