By Rachit Vats and Mike Stone
(Reuters) - Lockheed Martin Corp <LMT.N>, the world's largest defense contractor, reported a quarterly profit on Tuesday that handily beat analysts' expectations, as sales of its Sikorsky helicopters pushed total revenue up 14.8 percent.
Lockheed's shares were up about 7 percent in afternoon trading following the company's earnings conference call.
The company also raised its adjusted profit and sales outlook for the year.
Results from the Pentagon's No. 1 weapons supplier are often seen as a bellwether for the U.S. defense sector. Northrop Grumman Corp <NOC.N> and Raytheon Co <RTN.N> are due to report quarterly results later this week.
The company said third-quarter sales in its rotary and mission systems business unit jumped 55 percent to $3.35 billion, which included about $1.2 billion from sales of Sikorsky military and commercial helicopters. Lockheed completed the $9 billion acquisition of Sikorsky from United Technologies Corp <UTX.N> last year.
Lockheed said sales in its aeronautics business, the biggest division, increased 6.8 percent due to higher net sales of approximately $300 million for the F-35 jet program due to higher aircraft production and sustainment activities.
Only 10 F-35 aircraft were produced this quarter compared with 12 for the same period last year. On their quarterly results conference call, management said a problem with the insulation in the F-35's fuel lines and fuel tanks, and the subsequent fix for aircraft still on the production line, was the reason for "lighter" F-35 deliveries this quarter.
Lockheed is developing and building F-35s for the U.S. military and eight other countries. With estimated development and procurement costs of $391 billion for the United States alone, the F-35 is the world's most expensive weapons program.
Lockheed's space systems division, the third largest unit at the Bethesda, Maryland-based company, delivered $185 million in additional operating profit for the quarter, a 70 percent increase over the same period last year.
According to Thomson Reuters I/B/E/S calculations, the company's income from continuing operations was $3.27 per share, versus the average analyst estimate of $2.87.
Net income more than doubled to $2.40 billion, or $7.93 per share, in the third quarter ended Sept. 25, from $865 million, or $2.77 per share, a year earlier.
"Most investors who take a look at the trading chart will conclude that this result is more than enough for a stock that has underperformed sharply of late," Barclays analyst Carter Copeland said in a research note.
Lockheed's net income included a one-time special cash payment of $1.8 billion from the company's $5 billion tax-free deal to merge its information systems and global solutions business with Leidos Holdings Inc <LDOS.N> earlier this year.
The company said it expected 2017 net sales to increase by 7 percent compared to 2016. The company also said it expected business segment operating margins to be between 10 and 10.5 percent.
Lockheed raised its adjusted outlook 2016 profit forecast of $11.15 to $11.45 per share to $12.10 and said its forecast for adjusted sales of $45 billion to $46.2 billion had been raised to $46.5 billion.
Net sales rose to $11.55 billion from $10.06 billion a year earlier.
(Reporting by Rachit Vats in Bengaluru and Mike Stone in Washington; Editing by Sayantani Ghosh and Tom Brown)