By Melodie Warner Of DOW JONES NEWSWIRES TAKING THE PULSE: U.S. aerospace and defense contractors are girding for inevitable budget cuts, but the sentiment at last month's Paris Air Show -- the biggest trade show for the aviation industry -- was cautiously optimistic. Some in the industry expect only marginal federal spending cuts over the next two or three years as the most painful defense cuts will probably be delayed until the Pentagon's new leadership finishes a strategic review and reassesses spending plans. COMPANIES TO WATCH: Lockheed Martin Corp. (LMT) - reports July 26 Wall Street Expectations: Analysts polled by Thomson Reuters recently expected a profit of $1.93 a share on $11.43 billion in revenue, compared with $2.22 a share and $11.44 billion, respectively, a year earlier. Key Issues: The aerospace and defense company disclosed plans last month to cut about 2,700 positions from its aeronautics and space-systems segments. The cuts should help the aeronautics unit improve its profitability and pricing, but the space-systems business faces an uncertain future with the pending closure of major projects and the federal government looking to trim costs. On the other hand, NASA designated Lockheed's four-person space capsule, dubbed Orion, as the likely vehicle to take future astronauts beyond Earth's orbit, a decision that could lock in billions of revenue over the next few years. Focus is also on what happens with the F-35 Joint Strike Fighter. The most expensive defense program in history has met some key milestones in recent months, but late and over-budget, the U.S. and other countries may cut planned orders. Boeing Co. (BA) - reports July 27 Wall Street Expectations: Analysts forecast a profit of 96 cents a share on $16.41 billion in revenue, compared with $1.06 a share and $15.57 billion, respectively, a year earlier. Key Issues: The aerospace giant delivered 118 commercial airplanes in the second quarter, a 3.5% increase from a year earlier. The company is stepping up production of its next-generation 737 model to meet growing customer demand and expects to deliver the first 787 Dreamliner some time in August or September, more than three years behind schedule. Boeing Chief Executive Jim McNerney has said its defense business would act as a backstop to any sudden reversal in the recovery of its commercial unit. Of interest will also be the accounting treatment for the 787 program, which will reveal when Boeing will start making money on the plane. General Dynamics Corp. (GD) - reports July 27 Wall Street Expectations: Analysts forecast a profit of $1.72 a share on $8.24 billion in revenue, compared with $1.67 a share and $8.1 billion, respectively, a year earlier. Key Issues: The defense contractor has predicted progressive growth of per-share earnings throughout the year. The company's profit has improved on the strength of its information-technology business, its biggest top-line contributor. It is acquiring Fortress Technologies Inc., a provider of secure wireless local-area-network capabilities for the battlefield, and expects to close the deal during the third quarter, though it won't add to earnings until 2012. Furthermore, General Dynamics still expects to receive FAA certification this year for its new Gulfstream G650, the largest and fastest business jet it has ever developed. The aircraft crashed during an April 2 test flight, killing all four people on board, but flight tests resumed in late May. Northrop Grumman Corp. (NOC) - reports July 27 Wall Street Expectations: Analysts forecast a profit of $1.68 a share on $6.97 billion in revenue, compared with $2.34 a share and $8.8 billion, respectively, a year earlier. Key Issues: This is Northrop's first quarterly report since spinning off Huntington Ingalls Industries Inc. (HII), the country's largest military shipbuilder. The defense contractor raised its full-year earnings and sales guidance in April, saying its newly aligned portfolio generated solid first-quarter results. But Bernstein Research cut the company to market perform from outperform last week, citing Northrop's relatively flat revenue and margin outlook. Raytheon Co. (RTN) - reports July 28 Wall Street Expectations: Analysts forecast a profit of $1.16 a share on $6.19 billion in revenue, compared with 55 cents a share on revenue of $5.97 billion a year earlier. Excluding pension impacts and termination of a U.K. border program, earnings were $1.36 a share. Key Issues: The defense contractor has been going after international business in order to diversify. Last month, it was awarded a $1.7 billion contract to upgrade the Saudi Arabian government's air-and-missile-defense system. The company saw its missile systems sales -- the largest contributor to its top line -- fall 2.4% last quarter. Raytheon also cut its full-year earnings from continuing operations estimate in April, citing the U.K. Border Agency's decision to draw down on letters of credit the company provided. (The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.) -By Melodie Warner, Dow Jones Newswires; 212-416-2283; melodie.warner@dowjones.com
