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CONTINUING STRENGTH FROM U.S. MAJORS

CONTINUING STRENGTH FROM U.S. MAJORS
By Julian Nettlefold, Editor, BATTLESPACE

24 Jan 08. The FT reported that the US defence sector gave heart to an embattled corporate America on Thursday after two of the industry’s leading companies reported healthy quarterly earnings.

Lockheed Martin, the world’s largest defence contractor, reported fourth-quarter profits well ahead of analysts’ expectations and raised its forecast for 2008, while profits at Northrop Grumman, the US’s third biggest, came in just above expectations.

Bob Stevens, Lockheed’s chairman, president and chief executive, said the
results showed “our programme execution was solid, we won important new business and we continued to shape a balanced business portfolio.”

The Boeing Company

30 Jan 08. The Boeing Company’s [NYSE: BA] 2007 net income increased 84 percent to a record $4.1bn, or $5.28 per share, up from $2.2bn, or $2.85 per share, in 2006 on higher commercial airplane deliveries, strong growth in defense earnings, companywide productivity improvements, and certain charges recorded in 2006 (Table 1). Revenue rose 8 percent to a record $66.4bn, while the operating margin expanded to 8.8 percent driven by double-digit margins in its commercial airplanes and defense businesses.

Fourth-quarter revenue held at $17.5bn while the operating margin increased to 8.7 percent driven by margin expansion in its core businesses. Operating earnings grew 32 percent, while earnings per share increased 5 percent to $1.36 per share affected by a higher effective tax rate.

Boeing raised its 2008 earnings per share guidance to between $5.70 and $5.85,
as productivity gains are being realized ahead of earlier plans.

“Our 2007 results demonstrate the kind of quality financial performance we can
achieve through our simultaneous focus on growth and productivity,” said Chairman, President and Chief Executive Officer Jim McNerney. “We added substantial backlog, made major efficiency gains, and executed well on our production and services programs. Despite some development program challenges, we are a strong company growing stronger, and we expect continued improvement in our financial results in 2008 and beyond.”

Full-year operating cash flow grew 28 percent to a record $9.6bn, reflecting
strong operating earnings, higher commercial airplane orders, and a decrease in working capital requirements. Free cash flow* increased 35 percent to a record $7.9bn. Total company backlog at year-end reached a record $327bn, up 31 percent in the last twelve months driven by commercial airplane orders and defense program wins.

4th Quarter Full Year

Cash and investments in marketable securities totalled $12.1bn at year-end, up 30 percent from the same period last year and down slightly from the end of the third quarter. During the fourth quarter, the company increased its share repurchase authorization by $7bn and spent $890m for 9.4m shares.
Share repurchases for the year totalled $2.8bn for 29.0m shares. Also in the fourth quarter, the company increased its dividend by 14 percent. Consolidated debt decreased 5 percent as Boeing Capital Corporation repaid maturing debt.

Segment Results

Commercial Airplanes

Boeing Commercial Airplanes (BCA) fourth-quarter revenues increased 17 percent to $8.9bn on a 9 percent increase in deliveries, to 112 airplanes, and higher
commercial aviation services revenue. Operating earnings grew 46 percent to
$973m on favourable product mix, and operating margins expanded to 11.0 percent.
Margins in the latest quarter primarily reflect higher operating leverage and expanding productivity. For the full year, BCA revenues rose 17 percent to $33.4bn on an 11 percent increase in airplane deliveries and higher services volume. Operating earnings grew 31 percent to $3.6bn while margins expanded to 10.7 percent, driven by higher delivery volume and services sales, partially offset by increased R&D spending. BCA bo

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