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Lockheed raises 2016 forecast as F-35, Sikorsky lift sales

A Lockheed Martin F-35 Lightning II fighter jet is seen in its hanger at Patuxent River Naval Air Station in Maryland October 28, 2015. REUTERS/Gary Cameron

By Ankit Ajmera

(Reuters) - Lockheed Martin Corp (LMT.N) raised its 2016 forecast as the Pentagon's No. 1 weapons supplier continues to gain from the F-35 fighter jet program and its acquisition of helicopter maker Sikorsky Aircraft.

Shares of Lockheed, which also reported higher-than-expected quarterly sales, were up as much as 2.2 percent in morning trading.

The results from the world's largest defense contractor, often seen as a bellwether for the U.S. defense sector, also pushed up shares of smaller rivals Raytheon Co (RTN.N) and Northrop Grumman Corp (NOC.N) by about 1 percent.

Revenue from Lockheed's aeronautics business increased 21 percent, led by the F-35 program. The aeronautics business is its biggest and accounts for 34 percent of total revenue.

The F-35 Joint Strike Fighter is the Pentagon's largest weapons program, and the government is expected to spend $391 billion in development and purchase of the jets.

Lockheed has been scrambling to lower costs and become more agile as it speeds up production of the fighter jets. The company plans to deliver 53 F-35 jets in 2016, up from 45 a year earlier.

Sales in the latest quarter also got a lift from the company's $9 billion acquisition of Sikorsky Aircraft last year.

Revenue from its mission systems and training (MST) business, which includes Sikorsky, rose 52 percent in the quarter.

"We're particularly encouraged by the revenue performance," RBC Capital Markets analyst Robert Stallard wrote in a note.

"We had not expected a guidance increase at this early stage of the year, so that is another bonus - more than offsetting the cost of redundancies," Stallard said.

Lockheed now expects 2016 profit of $11.50-$11.80 per share, up from its previous forecast of $11.45-$11.75.

The company also raised its full-year sales forecast to $49.6 billion-$51.1 billion from 49.5 billion-$51.0 billion.

The company's net sales rose 15.7 percent to $11.70 billion in the first quarter, beating average analysts' estimate of $11.34 billion, according to Thomson Reuters I/B/E/S.

Net income fell nearly 10 percent to $794 million, or $2.58 per share.

Northrop and Raytheon will report results on Wednesday and Thursday, respectively.

Up to Monday's close, Lockheed's stock had risen 16 percent in the past 12 months, compared with a 1.4 percent decline in the S&P 500 index (.SPX).

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sweta Singh and Anil D'Silva)