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Wednesday, April 25, 2007

Lockheed Martin First Quarter: Not affected much by Littoral Combat Ship cancellation


Reported as Earnings Preview: Lockheed Martin Corp:
In January, the Navy placed a 90-day stop-work order on one LCS, after costs far exceeded its initial $270 million price tag. After weeks of negotiations, the Navy canceled the company's second multimillion-dollar ship earlier this month.

A March 30 report by the Government Accountability Office also detailed cost and weight issues on a newly redesigned presidential helicopter raising further concerns on Lockheed's management of military programs.

Company officials appeared unfazed by the string of negative headlines, and touted the numerous multimillion-dollar, multiyear defense contracts secured this quarter.
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CIBC World Markets Corp. research analyst Myles Walton expects the defense contractor to report a good quarter, and said results could beat estimates by 10 cents per share. Walton estimates Lockheed will report net income of $1.36 for the quarter.

"We don't expect financial impact from the LCS cancellation, though it is one of the first public performance blemishes on the company in some time," Watson said in a client note.
In other news, Lockheed objects to fixed-priced deals:
A Lockheed Martin executive on Tuesday bristled at the Navy's growing interest in fixed-price contracts for new military programs, saying the money-saving strategy could backfire by reducing the quality of the work performed.
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Lockheed has repeatedly blamed cost overruns on LCS on revised Navy requirements and delays in getting material from subcontractors.

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