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6 Defense Stocks Rising Above the Sequester

Strong earnings from sector show cost-cutting has been working

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Lockheed Martin

Lockheed Martin Corp. (NYSE: LMT)Lockheed Martin — the largest defense pure play — managed to overcome sequestration and sagging Pentagon spending to post earnings of $2.64 a share, up from $2.38 for the same quarter a year ago and far better than the $2.20 consensus. The company, which also benefited from a lower pension charge, raised its full-year earnings forecast to between $9.20 and $9.50 a share.

Lockheed Martin is heavily dependent on defense sales; its top programs include the F-35 Lightning II Joint Strike Fighter, Littoral Combat Ship, Patriot Advanced Capability-3 (PAC-3) missile and the AEGIS missile defense system.

That’s why LMT’s profitability has been driven by moves to cut overhead costs. For example, although revenue in its mission systems and training business slumped 12%, the company actually was able to boost earnings by 41%. Lockheed Martin continues to battle lagging performance in its information technology and space systems businesses, however.

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