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Lockheed beats analyst estimates as fighter-jet deliveries climb

An F-35C Lightning II arrives April 15, 2016, at Hill Force Base, Utah. The aircraft is the first Navy variant to arrive at the base where it will undergo depot modifications through this summer. The aircraft is assigned to the Navy’s Strike Fighter Squadron 101 at Eglin AFB, Florida. (U.S. Air Force photo/R. Nial Bradshaw)

An F-35C Lightning II arrives April 15, 2016, at Hill Force Base, Utah. The aircraft is the first Navy variant to arrive at the base where it will undergo depot modifications through this summer. The aircraft is assigned to the Navy’s Strike Fighter Squadron 101 at Eglin AFB, Florida. (U.S. Air Force photo/R. Nial Bradshaw)

Lockheed Martin Corp. reported second-quarter profit that topped analysts’ projections, bolstered by higher deliveries of F-35 Lightning II fighter jets.

Earnings were $3.32 a share, Lockheed said in a statement Tuesday. The results exceeded the $2.93 average of 16 estimates compiled by Bloomberg. Revenue of $12.9 billion was more than the $12.6 billion analysts anticipated.

The company also raised its annual forecast. Earnings will be $12.15 to $12.45 a share for 2016, compared with the $11.50 to $11.80 range forecast in April. The company increased its forecast for sales to a range of $50 billion to $51.5 billion from between $49.6 billion and $51.1 billion.

The strong results for the world’s largest defense contractor set the stage for its peers. Boeing Co., General Dynamics Corp., Northrop Grumman Corp. and Raytheon Co. are slated to report quarterly results next week.

Lockheed Chief Executive Officer Marillyn Hewson is set to discuss the quarter and explain how the Bethesda, Maryland-based company is navigating a world fraught with heightened tension and conflict, during a conference call with analysts at 11 a.m. in New York.

Shares climbed 1.6 percent to $260.49 at 7:52 a.m. in New York.

Turkey Exposure

The company has the largest exposure of any U.S. or European defense contractor to Turkey, site of a failed coup attempt against President Recep Tayyip Erdogan last week, Byron Callan, analyst with Capital Alpha, said in a July 16 client note. The country has expressed interest in buying six F-35 fighters between 2017 and 2019 and another 94 to be delivered next decade.

The stealthy F-35 is the Pentagon’s most-expensive weapons system, with total costs expected to approach $400 billion. The advanced fighter jet accounts for about 20 percent of Lockheed’s revenue, according to Bloomberg Intelligence. Lockheed delivered 14 of the jets in the second quarter.

Lockheed’s aeronautics division, its largest, recorded sales growth of 5.9 percent in the quarter from a year earlier as the manufacturer sped deliveries of the F-35 fighter jets.

Slow Negotiations

However, Lockheed warned that it still hasn’t concluded long-running contract negotiations with the Pentagon for two batches of the advanced fighter jets and has warned Defense Department officials that current funding is “insufficient to cover the production process.”

As a result, Lockheed has about $900 million of potential cash exposure and $3 billion in termination-liability exposure related to the contracts. The manufacturer said it is currently negotiating final contract terms and expects to receive the additional funding by year-end.