Lockheed Martin reports 2Q as defense industry outlook grows murky

Earnings Preview: Lockheed

BETHESDA, Md. — Lockheed Martin Corp., the nation’s largest defense contractor, reports its second-quarter earnings before the market opens on Tuesday.

WHAT TO WATCH FOR: How the shifting defense industry market is affecting Lockheed and its sales of military equipment.

Lockheed is still the Pentagon’s biggest source of weapons such as fighter jets. But like the rest of the defense industry, it faces uncertainty over defense budgets and how the military is parceling outs its contracts.

Defense Secretary Robert Gates has urged defense contractors to cut their overhead costs on big spending programs in an effort to save money. Gates also pushed back at Lockheed earlier this year, criticizing the company for cost overruns on its huge F-35 fighter program and withholding performance bonuses.

Tougher rules for defense contracting also forced Lockheed to announce plans during the quarter to sell off two business units.

Lockheed had some wins in the quarter, including regaining a $5 billion contract to support special operations troops.

WHY IT MATTERS: Lockheed’s business is closely tied to the priorities of the U.S. government, especially the Department of Defense. As military spending flourished in the last decade, so too did Lockheed’s profits. But with a new push for austerity in Washington, the company may face stingier times ahead.

WHAT’S EXPECTED: Analysts surveyed by Thomson Reuters expect Lockheed to earn 1.78 cents per share in the second quarter on revenue of $11.48 billion.

LAST YEAR’S QUARTER: In the second quarter of 2009, Lockheed earned $734 million, or $1.88 cents per share on revenue of $11.24 billion.