By Calvin Biesecker

Lockheed Martin [LMT] yesterday reported strong fourth quarter sales and a scant increase in earnings, which nonetheless easily beat Wall Street expectations.

The company’s net income of $827 million, $2.17 earnings per share (EPS), was barely more than the $823 million ($2.05 EPS) earned a year ago. Consensus expectations were for $1.99 EPS. Stock repurchases throughout 2009 helped boost the increase in per share earnings above the flattish net income level. A swing from pension income a year ago to an expense in the fourth quarter combined with other expenses depressed the earnings growth.

Sales were up 13 percent to $12.5 billion from $11.1 billion.

The increased expenses masked an otherwise good performance from three of Lockheed Martin’s four reporting segments. Segment profits were up 8 percent to $1.4 billion, led by soaring gains at Space Systems.

The Space business boosted sales 28 percent to $2.6 billion and operating profit 43 percent to $300 million on higher volume in government satellite programs, commercial launch vehicle programs and NASA’s Orion crew exploration vehicle and improved performance.

The Aeronautics and Electronic Systems segments also posted double-digit sales and earnings growth driven by higher volumes on the C-130, F-35, F-16 and P-3 aircraft programs, as well as tactical missile, missile defense, and simulation and training programs.

The Information Systems & Global Services business, which has had a rough year, managed weak growth but saw its operating earnings fall due to a reduction in performance adjustments for civilian service work and for defense work related to readiness and stability operations and global programs.

Bruce Tanner, Lockheed Martin’s chief financial officer, said the problem issues at IS&GS have been stabilized and that the company hasn’t seen further deterioration.

For the year, Lockheed Martin’s net income declined slightly to $3 billion ($7.78 EPS) from $3.2 billion ($7.86 EPS) a year ago. Sales increased 6 percent to $45.2 billion from $42.7 billion. Backlog was down $2.9 billion from a year ago, standing at $78 billion at the end of 2009.

Going forward the company raised its earnings guidance for this year by a dime to between $7.15 and $7.35 as a lower expected share count and lower interest expenses will more than offset higher pension expenses.