Boeing Network & Space Systems Reports 4 Percent Growth

By | April 30, 2007 | Feature, North America, Telecom

Boeing space revenues increased 4 percent to $2.9 billion in the first quarter of 2007 on increased sales of satellites and ground-based missile defense (GMD) programs, Boeing announced April 25. The gains offset expected loss of reported revenue from the formation of the United Launch Alliance (ULA) with Lockheed Martin Corp.

Operating margin for the space sector was 5.7 percent in the quarter, including adjustments relating to the ULA joint venture and revised cost estimates on satellite programs.

Overall, Boeing’s first quarter net earnings increased 27 percent to $877 million. Revenue improved 8 percent to $15.4 billion, with earnings from operations increasing 36 percent to $1.3 billion.

Boeing CFO James Bell explained during a conference call that "margins in our Network and Space Systems area were affected by cost adjustments this quarter, but we expect that segment will still meet its margin guidance for the year. IDS completed major milestones during the quarter, including a successful test of the Future Combat Systems program and a sea-based radar test of the Ground-based Missile Defense program. IDS also successfully completed its critical design review of FAB-T helping to pave the way for deliveries to begin."

Bell also explained that "up until this quarter we had about 9-3 quarters on satellite programs where we operated [Technical Difficulty] at outstanding performance on these types of programs which really are many fixed priced to government programs and a lot of respect.

"The one that we specifically called out in this release was an adjustment to the new sky satellite that was lost on the failure of the Sea Launch, and it’s the difference between what we had previously thought we get an insurance proceeds and that what we now think. So that’s the specific adjustment we called out."

Asked whether Boeing planned to expand offerings among its commercial satellite business – specifically whether to develop a smaller satellite, moving its 702 satellite down toward into a size range of maybe 7 or 8 kilowatts, Bell said that while the company has been receiving interest from customers for such a product, "we are not going to get down to too small of a satellite because those satellites are commoditized, which we don’t want to play in that market. We do have to have technology differentiate us, but we think there is some room for expansion of market, even with that and what we have been looking at lately. And I don’t think it will effect the investments very significantly at all."

In a research note, analyst Byron Callan of Prudential Financial reiterated his giving Boeing an "overweight" rating while raising his estimates for the company. The target price was raised from $99 to $103.

Lockheed Martin Posts 17 Percent Jump In Earnings Through Technology

Earnings at Lockheed Martin Corp. rose in the first quarter as it increased sales to military and government customers.

The Bethesda-based military contractor reported April 24 that first-quarter earnings jumped 17 percent because of higher sales at its technology unit and one-time gains.

The company raised its 2007 financial goals in light of recent acquisitions, operational improvements and the first-quarter performance.

Overall, Lockheed earned $690 million, or $1.60 a share, in the three months ended March 31, up from $591 million, or $1.34 a share, in 2006.

The latest results included gains totaling 21 cents per share from sale of land holdings, reversal of a legal settlement and a tax benefit.

Sales increased 1 percent to $9.28 billion.

Prudential analyst Byron Callan blamed the miss on lower-than-expected sales at the company’s electronics systems. A 9 percent decline in space-systems sales was expected after Lockheed changed its accounting for its launch business.

Shares of Lockheed rose 1.75 percent to $97.07 in normal trading the day after the figures were released, and gained another 1.27 percent to $90.30 in the after-hours on thin volume of 21,000 shares.

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