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Sales drove Lockheed Martin’s Aeronautics segment

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About the segment

Lockheed Martin’s Aeronautics segment is engaged in the research, design, and development of advanced military aircraft—including combat and air mobility aircraft, unmanned air vehicles, and related technologies. You can read more about the segment in Aeronautics: Lockheed Martin’s highest revenue segment.

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Fourth quarter analysis

Lockheed Martin’s (LMT) Aeronautics segment saw a 6% year-over-year, or YoY, growth in net sales. Net sales were driven by higher sales of the F-35 and C-130 programs. They were partially offset by lower sales in the C-5 program. The quarter also saw higher operating profit of $40 million for the F-22 program and about $40 million for the C-130 program.

This drove the segment’s overall operating profit up by $27 million. However, this was dampened by lower profits of about $50 million due to decreased risk retirements. Overall, the volume growth in the F-35 production programs fueled the growth in the Aeronautics segment. It’s expected to continue to do so in the future.

Some of the major contractors for the F-35 program, aside from Lockheed Martin, include Northrop Grumman (NOC), BAE Systems (BAESY), and United Technologies (UTX). Lockheed Martin, Northrop Grumman, and United Technologies form a 10.02% holding of the Industrial Select Sector SPDR (XLI).

Full-year analysis

On a yearly basis, the Aeronautics segment proved to be the growth driver for the company. It had a 6% YoY growth in revenue. The growth was due to higher sales of the F-35 production contracts. The program contributed to about 52% of the segment’s revenue in the year. This was also followed by $55 million in revenue for the F-16 program—driven by higher deliveries.

The operating margin was 11.4% at the end of the year. The operating profits improved by 2% YoY to reach $1,649 million in 2014. The operating profits for the F-16 program were lower than expected due to decreased risk retirements. For the year, the backlog was $27,600 million—due to lower orders on the F-16 and F-22 programs.

Overall, the F-35 program drove the Aeronautics segment to a strong performance in the quarter as well as fiscal year 2014.

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