Lockheed earnings beat Street, full-year forecast raised

 Lockheed Martin Corp yesterday beat analysts’ forecasts with a 10% rise in second-quarter earnings and lifted its full-year profit forecast, saying Pentagon budget cuts had not hurt as much as expected. The news sent shares of Lockheed, the Pentagon’s largest supplier and maker of F-35 fighter jets, Aegis missiles and new coastal warships, up nearly 3% in premarket trading.

Lockheed said it now expects earnings per share of $9.20 to $9.50 for the full year, up 4% from its April guidance. It left its revenue forecast unchanged at $44.5bn to $46bn.

The company reported second-quarter net earnings of $859mn, up from $781mn a year earlier. Earnings per share rose to $2.64 from $2.38.

Revenues fell 4% to $11.4bn.

Analysts polled by Thomson Reuters I/B/E/S had expected earnings of $2.20 per share on revenue of $11.1bn.

Revenue was down or flat in four of Lockheed’s five operating units. The exception was missiles and fire control, where sales rose 11%.

Operating profit was lower in aeronautics, information systems and space business units, but grew significantly in missiles and fire control and mission systems.

Lockheed said its Missions Systems and Training division lifted its operating profit by $80mn, or 41%.

Chief executive Marillyn Hewson told reporters the company’s biggest programme, the F-35 fighter jet, enjoyed strong support from the Pentagon and international buyers. She said Lockheed was making “good progress” in talks with the Pentagon about the next two batches of F-35 fighter jets and hoped to complete an agreement in the near term.

Lockheed is building three models of the F-35 for the US military and eight international partner countries — Britain, Australia, Canada, Norway, Turkey, Italy, Denmark and the Netherlands. Israel and Japan have also ordered the jet.

United Technologies

United Technologies, the world’s largest maker of elevators and air conditioners, raised the bottom end of its 2013 earnings forecast yesterday, citing its growing confidence after a jump in aerospace orders and cost cuts.

However, the conglomerate, which also makes Pratt & Whitney jet engines and Black Hawk helicopters, said revenue would be at the lower end of its forecast of $64bn to $65bn for this year.

Executives said the onus was on them to turn United Tech’s burgeoning order book into revenue, a challenge they said was achievable.

Orders for large commercial engine parts rose 65% in the second quarter, largely because of last year’s $16.5bn acquisition of parts maker Goodrich, the largest in United Tech’s history.

The buyout, though criticized as expensive at the time, has helped United Tech become the preeminent supplier of parts to aerospace customers, offering a suite of services previously supplied by many rivals.

Roughly 65% of an airplane’s components now come from United Tech, estimates William Blair & Co analyst Nick Heymann. The rise in miles flown by airlines around the world has caused demand for spare parts to grow, boosting United Tech’s profit.

United Tech posted second-quarter income of $1.56bn, or $1.70 per share, compared with $1.33bn, or $1.62 per share, a year earlier.

 Analysts on average expected earnings of $1.57 per share, according to Thomson Reuters I/B/E/S.

Revenue rose 16% to $16bn. Analysts expected $16.37bn.

United Tech raised the low end of its 2013 earnings forecast to $6a share from $5.85 while keeping the high end at $6.15.

Wall Street expects 2013 profit of $6.11 per share.

United Tech also raised its cost cut estimate for 2013 to $450mn from $350mn.

Most of the cost cuts are layoffs across United Tech’s various businesses. Last week, for instance, 575 employees at the Pratt & Whitney unit took buyout packages.

United Tech said that because some new jet engine projects would not launch until at least 2015, the company needed to cut costs now.

Freeport

Freeport-McMoRan Copper & Gold reported a 32% drop in second-quarter profit yesterday, reflecting weak metal prices and higher costs, and said it will reduce spending through 2014, given the uncertain economic environment.

The world’s No 1 publicly listed copper producer also cut its full-year outlook for copper and gold sales after production was halted for nearly two months at its Grasberg complex in Indonesia following a fatal training tunnel collapse.

Freeport now expects to sell 4.1bn pounds of copper, down 5% from 4.3bn pounds, and 1.1mn ounces of gold, down 21% from 1.4mn ounces.

The Arizona-based miner, which closed a $19bn takeover of two US energy companies in the quarter, said it is clamping down on spending and has cut some $1.9bn in planned capital expenditures and other costs through 2014.

The company also plans to divest non-core assets and reduce costs further.

Freeport reported net income of $482mn, or 49¢ a share, down from $710mn, or 74¢ a share, a year earlier.

Revenue fell 4% to $4.3bn as its copper unit cash costs rose 24% to $1.85 per pound and the realized copper price fell 10% to $3.17.

Copper sales were up 3% to 951mn pounds, while gold sales slid 35% to 173,000 ounces, and the average realized gold price fell 17% to $1,322 an ounce.

Freeport closed its takeover of Plains Exploration & Production Co on May 31 and McMoRan Exploration Co on June 3.

United Parcel Service

United Parcel Service yesterday posted a smaller quarterly profit as customers, especially on international routes, chose slower, cheaper shipping services.

Earlier in the month, UPS said it expected to report a quarterly profit below analysts’ expectations due to a weak US industrial economy, customers switching to less expensive shipping options and overcapacity in the global air freight market.

UPS is considered an economic bellwether, along with rival FedEx Corp, because of the high volume and variety of goods they move around the world.

For the second quarter, UPS, the world’s No 1 package delivery company, said export shipments rose 5%, but because customers used more normal delivery services instead of express options, export revenue fell 3.4%.

In the domestic market, daily package volume improved 1.9% from the same period last year as more customers shopped online. Total US domestic revenue per piece was up 0.3%.

For the quarter, UPS earned $1.07bn, or $1.13 a share, in the second quarter, compared with $1.12bn, or $1.15 a share a year before. Total revenue increased 1.2% to $13.51bn.

RadioShack

Electronics retailer RadioShack Corp reported a wider-than-expected quarterly loss yesterday and named a turnaround expert as its interim financial chief.

Chief executive Joe Magnacca, who joined the company in February, said he expected a turnaround to take several quarters.

Sales at the electronics chain have been in free-fall for over a year amid executive departures, cutthroat competition and an image problem. Despite its ubiquitous presence in the US, analysts say the once-iconic retailer has not done enough to transform itself into a destination for mobile phone buyers or to become sufficiently hip to woo younger shoppers.

The retailer took more discounts to get rid of “unproductive” inventory in the second quarter, squeezing margins. Its net loss widened to $53.1mn, or 53¢ a share, from $21mn, or 21¢ a share, a year earlier.

Analysts, on average, expected a loss of 24¢ a share, according to Thomson Reuters I/B/E/S.

Several days ago, reports surfaced that the struggling retailer was talking to bankers about refinancing its debt. Yesterday, Magnacca said RadioShack would work with AlixPartners and investment banking firm Peter J. Solomon Co to engineer a turnaround.

RadioShack reported a rise in second-quarter sales at stores open at least a year, its first quarterly increase since 2010.

Second-quarter sales fell 0.5% to $845mn, hurt by store closures. Same-store sales — sales at stores open at least a year — rose 1.3%. Gross margin was 37.2% of net sales, versus 40.1% a year earlier.

At the end of the quarter, the company had liquidity of $818mn, including cash and cash equivalents of $432mn and $386mn of available credit. The company’s total debt was $713mn.

RadioShack said it plans to pay down the remaining $214mn of its convertible notes maturing in 2013 with cash.

Swatch

The world’s biggest watch-making group Swatch reported yesterday that net profit growth slowed in the first half of the year, but still beat analysts’ expectations.

The company, most known for its brightly coloured plastic-cased watches, reported only single-digit net profit growth for the the first time since 2009.

Net profit grew 6.1% to 768mn Swiss francs ($820mn, 622mn euros) during the first six months of the year.

Swatch Group sales, meanwhile, ticked in 8.7% higher at 4.1bn Swiss francs, the company said in its earnings statement.

The net profit was slightly higher than the 733mn francs expected by analysts polled by the AWP financial agency, while the sales were in line with expectations.

In recent years, the Biel-based group has seen its business balloon on a seemingly insatiable appetite by Chinese consumers for luxury watches, but company chief Nick Hayek warned in March that the massive growth could not go on forever.

While Swatch’s low-end plastic watches are perhaps its most recognisable, the Swiss company operates in every price range, from the Flik Flak children’s watches to prestigious timepieces under for instance the Breguet brand which can cost more than one million Swiss francs each.

The watchmaker said yesterday that it aimed to launch a number of new products in coming months.

Polaris

Polaris Industries reported a higher second-quarter profit yesterday and raised its outlook for the full year, citing strong sales of its all-terrain vehicles and other power sports products in North America.

The Minneapolis-based company, which also makes snowmobiles and motorcycles, said it earned $80mn, or $1.13 a share, up from $69.8mn, or 98¢ a share, a year earlier. Sales rose 12% to $844.8mn.

Polaris said retail sales to consumers in North America rose 11%, offsetting what it called “sluggish international consumer demand.”

The company, which had already raised its earnings outlook in April, increased it once again yesterday. Polaris said it expected to post a full-year profit of $5.20 to $5.30 a share, up from the most recent forecast of $5.05 to $5.20.

Netflix

The online video group Netflix said yesterday profits jumped in the past quarter, giving it some cash after recent Emmy nominations, but the results left investors cold.

Netflix said profits jumped nearly fivefold in the second quarter to $29.5mn, topping most Wall Street forecasts.

The company added 630,000 new US customers in the quarter, after increasing by over 2mn in the past two quarters. Netflix said it sees the prospects of more competition and a saturation of the US market.

“We are generating steady growth in members, revenue, and contribution profit,” Netflix said in a letter to shareholders.

“Our content mix, streaming and user experiences are all getting better and devices and bandwidth are improving. Countering this, competitors for consumer attention are also all improving, and the risk of US market saturation only grows as we do. Given these competing forces, we are very happy this year to be tracking slightly ahead of prior year in terms of net additions.”

Netflix recently broke ground with nine Emmy nominations for its original “House of Cards” series, becoming the first online service to be nominated. But it faces competition from the likes of Amazon, Hulu and others.

Wendy’s

Wendy’s Co posted a higher-than-expected quarterly profit yesterday and forecast strong earnings growth starting next year, sending its shares up 10% in early trading.

The No 2 US burger chain also raised its quarterly dividend by a penny, to 5¢ a share, and said it would sell about 425 company-operated restaurants by mid-2014 as part of a drive to improve its finances.

Second-quarter net income was $12.2mn, or 3¢ per share, compared with a year-earlier loss of $5.5mn, or 1¢ per share.

Excluding debt retirement costs and other one-time expenses, earnings were 8 cents per share, topping analysts’ average forecast by 2 cents, according to Thomson Reuters I/B/E/S.

Revenue rose to $650.5mn from $645.9mn.

The company said it expects a long-term growth rate in the mid-teens for adjusted earnings starting in 2014.

It said selling some of its company-operated stores to franchise operators would generate higher operating margins and increase long-term earnings-per-share growth, and aid its new branding efforts.

The company restated its prior forecast for full-year adjusted profit of 20¢ to 22¢ per share.

System-wide sales at established restaurants increased by 0.4% in the second quarter, well short of the 1.1% gain expected by analysts polled by Consensus Metrix.

Shares of the Dublin, Ohio-based company were up 73 cents to $7.41 in early trading.

Valero’s

Refining company Valero Energy Corp yesterday reported a 44% drop in second-quarter profit as higher prices for some of the crude oil it processes hurt margins.

US refiners are fast losing the cost advantage they have enjoyed for nearly three years as US benchmark oil prices steadily gain.

Refining throughput margins fell in the second quarter due to higher prices for crude and natural gas and rising costs of ethanol credits mandated by the US government, the San Antonio company said.

Valero warned on July 11 that its second-quarter profit would be lower than a year earlier and forecast its per-share profit at 80¢ to 90¢.

Net income attributable to stockholders fell to $466mn, or 85¢ per share, in the second quarter, from $831mn, or $1.50 per share, a year earlier.

The company earmarked a capital budget of $2.5bn to $3.0bn for 2014, compared with the $2.85bn it expects to spend in 2013.