Lockheed Martin [LMT] on Tuesday posted strong third quarter financial results driven by gains in three of its reporting segments and the company raised its earnings guidance for the year due to a tax benefit.

Net income increased 9 percent to $1.6 billion, $5.66 earnings per share (EPS), from $1.5 billion ($5.14 EPS) a year ago, torching consensus estimates by 63 cents per share. Total operating margin was 13.9 percent, up 20 basis points from a year ago.

Sales increased 6 percent to $15.2 billion from $14.3 billion a year ago.

The strong increase in earnings was led by the company’s Aeronautics segment on the higher risk retirements for F-16 fighter sustainment contracts and F-35 Joint Strike Fighter production, development and sustainment contracts. The Missiles and Fire Control (MFC), and Space segments also contributed to the bottom line gains, with higher risk retirements on energy programs and integrated air and missile defense programs, higher volume on the Patriot Advanced Capability-3 and Terminal High Altitude Area Defense (THAAD) missile defense programs, the United Launch Alliance joint venture, and commercial satellite programs cited as drivers.

At the top line, MFC led the way followed by Aeronautics and Space with precision fires and hypersonic weapons development, PAC-3 and THAAD, F-35 production, development and sustainment, classified development programs, Next Generation Overhead Persistent Infrared, Global Positioning System III, and hypersonic development programs in the Space segment driving the growth. Lockheed Martin delivered 28 F-35 fighters in the quarter versus 20 a year ago.

For the year, Lockheed Martin expects sales of around $59.1 billion, just above the midpoint of its previous guidance range of between $58.3 billion and $59.8 billion. The company’s segment operating profit is expected to be around $6.4 billion, right in the middle of the previous outlook of between $6.3 billion and $6.5 billion. Per share results are forecast at around $21.55, 40 cents EPS above the high end of earlier guidance.

The increase in earnings guidance is primarily due to tax benefits and to a lesser extent improvement in operational performance, sales and margin.

Sales in 2019 related to hypersonic weapons programs will be about $600 million and rise to about $1 billion in 2020, Kenneth Possenriede, Lockheed Martin’s chief financial officer, said on the company’s earnings call.

Lockheed Martin also introduced “financial trends” for 2020 with sales pegged to be around $62 billion with segment operating margin between 10.5 and 10.8 percent. Total business segment operating margin for the first three quarters of 2019 was 11.2 percent.

Operating margins will trend down a bit in 2020 due to new program wins that carry lower margins in development, Possenriede said.

One of those wins, a recent $281 million Army contract to upgrade its Sentinel radars to the A4 configuration, is potentially worth about $3 billion, including domestic and international customers, Marillyn Hewson, the company’s chairman, president and CEO, said on the call (Defense Daily, Sept. 25). The Sentinel A4 will provide improved air and missile defense against low-flying threats such as unmanned aerial vehicles and cruise missiles, she said.

Hewson said Lockheed Martin’s programs are well supported under the respective defense appropriations bills in the House and Senate, adding that continuing resolution that is funding the federal government through Nov. 21 won’t have an impact on its 2019 financial results given its funded backlog. However, if the continuing resolution, which restricts funding to fiscal year 2019 levels, is extended, it could impact the company’s 2020 trends outlook depending on how long it remains in effect, she said.

The federal government’s fiscal year 2020 began on Oct. 1.

Hewson was asked on the earnings call about any risks the company faces in reorganizing the portion of its F-35 supply chain based in Turkey after the U.S. banned sales of the aircraft to that country over the summer after it accepted an advanced Russian anti-aircraft system. She answered that the company already has a contract modification from the U.S. government that covers the risk.

Hewson also said Lockheed Martin is working with the U.S. government to find U.S.-based alternative suppliers for the components and parts of the aircraft that are being sourced in Turkey. The company has until March 2020 to find new suppliers for those parts.

Backlog at the end of the quarter stood at a record $137.4 billion, up 5 percent from $130.5 billion at the end of 2018. Free cash flow was around $2.2 billion in the quarter.