Lockheed Martin [LMT] on Tuesday reported solid fourth quarter results as the company swung to a profit on gains in most of its segments and the absence of hefty charges that chopped away at the bottom line a year ago due to the impacts of tax reform.

Net income in the quarter was $1.3 billion, $4.39 earnings per share (EPS), versus a loss of $744 million ($2.60 EPS) a year ago due to a $2 billion charge related to tax reform. Results were a penny shy of analysts’ estimates.

Sales increased 4 percent to $14.4 billion from $13.8 billion a year ago, with tactical and strike missile programs combined providing the largest impetus for the top line improvement followed by production and sustainment activities on the F-35 fighter program. F-16 production and sustainment, air and missile defense systems, NASA’s Orion space crew vehicle, fleet ballistic missiles and government satellite services also helped boost sales.

Lockheed Martin Chairman, President and CEO Marillyn Hewson. Photo: Lockheed Martin

At the operating profit level, the Missiles and Fire Control (MFC), Aeronautics, and Space segments all boosted revenue while MFC, Rotary & Mission Systems, and Space all posted higher operating profit.

Lockheed Martin introduced guidance for 2019, with sales expected to be between $55.8 billion and $57.3 billion and earnings between $19.15 and $19.45 EPS. Cash from operations is expected to equal or exceed $7.4 billion.

For 2019, sales increased 8 percent to $53.8 billion from $50 billion and net income more than doubled to $5 billion ($17.59 EPS) from $2 billion ($6.75 EPS) a year ago. Operating cash was $3.1 billion, which included a $5 billion contribution to pensions, and free cash flow was $1.8 billion.

Lockheed Martin delivered 91 F-35s in 2018, with 37 of the Joint Strike Fighters for international partners and foreign military sales customers. The company expects to deliver 131 this year, more in 2020, and more than 160 in 2021, company officials said on the earnings call. The company has nearly 400 F-35s in backlog. The aircraft is the company’s largest single program.

Lockheed Martin Chairman, President and CEO Marillyn Hewson said on the company’s earnings call that there is bipartisan congressional support for Defense Department spending, which made up around 60 percent of the company’s business in 2018. The company is “hopeful” that the Trump administration’s forthcoming budget request for fiscal year 2020 will be in line or above prior requests, she said.

Hewson said the 35-day long shutdown of part of the federal government didn’t significantly impact the company’s business expectations this year but cautioned that a recurrence of an appropriations lapse could delay some awards and orders.

Backlog at the end of 2018 stood at a record $130 billion versus $105 billion a year ago, in large part due to a significant order last November for F-35s covering production Lots 12 through 14. Bruce Tanner, Lockheed Martin’s outgoing Chief Financial Officer, said the backlog may go down in 2019 given the large F-35 order in 2018, adding that backlog should still exceed $125 billion at the end of 2019 with potential to grow afterward, particularly with a multi-year contract for the F-35 expected in 2022.

Asked by one analyst about media reports of interest in the Defense Department for acquiring more F-15 fighters, which are made by

Boeing [BA], Hewson said Pentagon leadership has told her “directly” than additional F-15 buys won’t come at the expense of the F-35. Lockheed Martin remains on track to achieve an $80 million per unit cost price on the F-35A conventional take-off and landing variant when the program moves to full-rate production.