Aerospace Industry Posts Solid Profits In Third Quarter

Good times are rolling in the aerospace industry.

Comparable profits advanced measurably during July through September at space and missile operations of the top contractors, including The Boeing Co. [BA], General Dynamics Corp [GD], Lockheed Martin Corp. [LMT], Northrop Grumman Corp. [NOC], and Raytheon Co.

The companies posted their quarterly financial results amidst lush days in the defense, space and missile industries.

Lockheed Martin saw its Space Systems unit post a 14.28 percent jump in operating profit to $176 million in the third quarter this year, from $154 million during the same three months last year.

As for net sales, Lockheed Space Systems posted a 10.35 percent gain during the third quarter, advancing to $1.855 billion in the period this year from the $1.681 billion recorded in the quarter last year.

For the first nine months of the year, the largest defense contractor saw Space Systems operating profit soar 23.18 percent to $558 million, eclipsing the $453 million in the three months last year.

Meanwhile, net sales in Space Systems for the year to date were bolstered 19.24 percent to $5.925 billion from the $4.969 billion showing in the period last year.

“For both the quarter and nine-month periods, the sales growth was mainly due to higher volume on both commercial and government satellite programs,” Lockheed reported.

And satellite deliveries were up sharply over last year.

“There was one commercial satellite delivery in the third quarter of 2006 and four in the nine months of 2006, compared to no deliveries during the comparable 2005 periods,” Lockheed reported.

Meanwhile, for Lockheed Launch Services, sales remained relatively unchanged for the quarter and nine months, according to the company.

Sales growth in the Lockheed Strategic & Defensive Missile Systems area stemmed from higher volume in both fleet ballistic missile and missile defense programs, helping to inflate the sales increase for the nine-month period.

Lockheed is involved in ballistic missile defense (BMD) programs, such as providing Aegis radar and weapons control systems for BMD capabilities.

In July through September this year, “operating profit increases in Launch Services were partially offset by a slight decline in Satellites,” according to Lockheed.

In Launch Services, the increase was mainly due to the Atlas program, including activities associated with the Evolved Expendable Launch Vehicle (EELV) Launch Capability (ELC) contract, according to Lockheed.

For the nine months, operating profit increased in all three of the segment’s lines of business. In Launch Services, the increase was driven by improved performance on the Atlas Program resulting from risk reduction activities, including the first quarter definitization of the ELC contract.

In the Space & Defensive Missile Systems unit, the increase was due to higher volume and improved performance on individual programs, while the growth in the Satellites area was driven mainly by the increase in commercial satellite deliveries, according to the company.

Northrop Grumman Corp. saw its Space Technology sector post sales of $782 million in the third quarter this year, off 7.13 percent from the $842 million in the period last year. However, the company reported that Space Technology operating margin increased 1 percent due to the sale of a patent and improved performance in the Advanced Extremely High Frequency program.

Northrop Grumman fire control and launch control equipment software, developed for the Missile Defense Agency (MDA) ground-based midcourse defense system, performed successfully during the MDA Flight Test 2 Sept. 1, in which the interceptor successfully tracked and subsequently destroyed the target warhead over the Pacific Ocean, Northrop noted.

The Boeing Co. reported that its Network & Space Systems unit profits slumped, but only because of one-time factors last year. Earnings from operations totaled $228 million for the unit in the third quarter this year, down from $712 million last year.

Appearances can be deceiving. The $712 million profit in the quarter last year included a $569 million gain from selling a Boeing subsidiary, Rocketdyne. If one removes the gain realized in the sale from the 2005 July-September performance, earnings from operations totaled only $143 million last year.

From that base, Boeing actually posted a rousing $85 million quarterly advance in profits for the Network & Space Systems unit, a whopping 59.4 percent jump.

In revenues, the unit pulled in $2.856 billion in the third quarter this year, off from the $3.036 billion in the last-year period, a 5.92 percent slippage due to lower volume in the Ground-based Midcourse Defense program and fewer planned milestone completions in the commercial satellite business.

It is typical in the space business to have quarterly variations, especially minor changes such as this.

Raytheon Co. Missile Systems saw steady increases in profits. Operating income rose 4.8 percent to $109 million in the third quarter this year from $104 million in the period last year. Meanwhile, Missile Systems net sales rose 7.0 percent to $1.081 billion in July through September this year, from $1.005 billion in the three months last year.

Sales gains in the third quarter stemmed primarily from a ramp-up on Standard Missile and several development programs.

The missiles unit also booked orders of $369 million for production of Phalanx Weapons Systems for the Navy; $311 million for additional development work on the Exoatmospheric Kill Vehicle (EKV) program; $267 million for the production of Standard Missile-3 (SM-3) for the Missile Defense Agency; and $163 million for the production of Tube-launched Optically guided Wire controlled (TOW) missiles for the Army.

Turning to the Raytheon Space and Airborne Systems unit, operating income rose 3.5 percent to $148 million in the third quarter, from $143 million in the year-earlier period.

As for net sales, the unit took in $1.069 billion in the quarter this year, a 5.5 percent improvement from the $1.013 billion in the 2005 period.

The Space and Airborne Systems performance was due primarily to growth in the Advanced Targeting Forward Looking Infrared (ATFLIR) and Airborne Radar Production programs, according to Raytheon.

In the third quarter this year, the unit booked $96 million to supply the Hellenic Air Force with Advanced Self-Protection Integrated Suite (ASPIS) equipment for its F-16 aircraft fleet. The unit also booked $192 million on a number of classified contracts.

As for the backlog of unfilled orders, Missile Systems posted $8.913 billion of work yet to be done as of Sept. 24, up from $8.040 billion at the end of last year. Space and Airborne Systems had $5.257 billion of backlogged orders, up from $5.220 billion at the end of 2005.

General Dynamics Corp. aerospace profits jumped 13.0 percent in the third quarter this year, advancing to $165 million from the $146 million those units achieved in July-September last year.

Meanwhile, GD also saw net sales gain 19.98 percent to break the billion-dollar barrier, reaching $1.087 billion in the three months this year versus $906 million last year.

In the first nine months of this year, GD aerospace units posted a solid $476 million in operating earnings, a 27.96 percent jump in profits from the $372 million recorded in the quarter last year.