Jan. 23 (Bloomberg) -- Lockheed Martin Corp., the U.S. government’s biggest contractor, said its fourth-quarter profit plunged 14 percent as federal budget cuts sapped sales and led to a goodwill writedown and job-reduction charge.
Lockheed’s net income from continuing operations fell to $488 million, or $1.50 a share, in the quarter, down from $569 million, or $1.73 a share, a year earlier, the Bethesda, Maryland-based company said today in a statement. Earnings adjusted for one-time charges were $2.38 a share, beating the $2.11 a share estimate of five analysts surveyed by Bloomberg.
Sales declined 4.7 percent to $11.5 billion in the quarter, with decreases across all five units including aeronautics, which suffered from fewer deliveries of C-130 cargo aircraft.
Contributing to the drop in fourth-quarter profit were special charges including $171 million for workforce reductions and a $195 million goodwill writedown tied to part of Lockheed’s missiles and fire-control unit affected by defense budget reductions and “related competitive pressures.”
Net income from continuing operations also included $120 million in pension expenses in the quarter, compared with $208 million in the year-earlier period.
In November, Lockheed announced it would eliminate 4,000 jobs and close some operations in response to slow spending by U.S. agencies.
Lockheed bought back 1.7 million shares for $229 million during the quarter, the company said. It paid out $428 million in dividends, compared with $373 million during the same period a year earlier.
Top government suppliers have been cutting their way to profitability as the federal contracting market shrinks. Publicly announced U.S. government prime contracts of at least $3,000 fell 11 percent to $456 billion in the year ended Sept. 30 from the previous period, the biggest annual decline since records began in 1984, according to data compiled by Bloomberg Industries analyst Brian Friel.
Lockheed estimated that its 2014 profit from continuing operations will be $10.25 to $10.55 a share on sales of $44 billion to $45.5 billion. The average estimate of 20 analysts surveyed by Bloomberg was $10.29 a share, with a sales projection of $44.2 billion.
“We will continue our focus on improving operational efficiency, reducing our cost structure, investing in innovations to address our customers’ future challenges and returning value to our shareholders,” Marillyn Hewson, Lockheed’s chief executive officer, said in the statement.
The company had a backlog of $82.6 billion at the end of the year, Hewson said on a conference call with reporters today. That compared with $78.7 billion at the end of the third quarter.
“That shows support for our portfolio,” Hewson said.
The Pentagon has managed to buffer high-priority major weapons systems from deep cuts under a series of automatic federal spending reductions known as sequestration.
Lockheed’s F-35 jet, the military’s costliest weapons program, is one of them.
The $1.1 trillion spending legislation for the current fiscal year funds all 29 F-35 aircraft that the Defense Department had requested, as well as the start of advance hardware purchases for 39 of the 42 jets on the military’s wish list for the year that begins Oct. 1, 2014.
The F-35 is Lockheed’s largest program. It generated 16 percent of sales in 2013, Chief Financial Officer Bruce Tanner told reporters. “That number will grow in 2014,” he said.
The F-35 accounted for 14 percent of Lockheed’s sales in 2012, according to a company regulatory filing.
Automatic federal spending cuts, known as sequestration, were eased last month in the congressional budget agreement, which may provide some relief to Lockheed and other contractors.
Amid defense cuts, Lockheed has risen 64 percent during the last 12 months through yesterday, exceeding the 24 percent gain in the Standard & Poor’s 500 Index.
General Dynamics rose 4.6 percent yesterday after the third-biggest federal contractor forecast higher business-jet sales and said it would step up share repurchases.
For 2014, profit is likely to be $6.80 to $6.85 a share on sales of about $30 billion, according to the Falls Church, Virginia-based company.
General Dynamics’s net income was $495 million, or $1.40 a share, compared with a $2.13 billion loss a year earlier. Sales rose less than 1 percent to $8.11 billion.