Defense contractor Lockheed Martin Corporation (LMT) decided to dispose of its Pacific Architects and Engineers Incorporated (“PAE”) business to Lindsay Goldberg, LLC.
Lockheed Martin acquired PAE in 2006, which provided services that supported military readiness, peacekeeping missions, personnel recruitment and training, and disaster relief services. The acquired unit then became a part of the Information & Technology Services segment of the company.
Post-acquisition, the company undertook numerous steps to improve its business, build a leadership team and sharpen operations. However, following a thorough assessment, on June 2, 2010, the company finally decided to divest this unit. The divestiture is grounded on the fact that the services demanded by PAE’s consumers fail to resonate with the long-term business strategy of the company.
This sale is expected to close by the second quarter of 2011 and is not likely to materially impact Lockheed’s business. Previously, during the fourth quarter 2010, the company completed the divestiture of Enterprise Integration Group (EIG) and recorded a gain of $184 million (51 cents per share) from the said sale.
Lockheed ended 2010 with a strong note, with both its fourth quarter 2010 earnings per share of $2.30 and 2010 earnings per share of $7.18 surpassing the corresponding Zacks Consensus estimates. The big peer, General Dynamics Corporation (GD), exceeded market expectations, while another major player, The Boeing Company (BA), failed to meet the consensus in the latest quarter.
The company issued 2011 earnings per share forecast in the range of $6.70 – $7.00. The Zacks Consensus Estimates for the first quarter 2011, fiscal year 2011 and fiscal year 2012 currently stand at $1.51 per share, $6.98 per share and $8.53 per share, respectively.
Lockheed Martin currently retains a Zacks #3 Rank (short-term Hold rating). We provide a long-term Neutral rating on the stock.
Based in Bethesda, Maryland, Lockheed Martin operates globally in research, design, development, manufacture, integration, operation, and sustainment of advanced technology systems and products.
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