Lockheed Tackles Its Pension

Lockheed Martin (NYSE: LMT) recently reported healthy third-quarter results, with sales up 5 percent over last year, an 8 percent improvement in earnings per share, an impressive 35 percent rise in operating cash flow, and even some modest backlog growth. So why did the stock slump on the news? Simple: pensions.

While many companies fret about pension shortfalls and look to transition employees to 401(k)s instead, Lockheed plans to shore up its pension fund, injecting $1 billion into it this year and a further $1.4 billion in 2010. Combined, the twin injections will eat up quite a bit of Lockheed’s yearly cash production.

Wall Street isn’t thrilled with the idea, but Lockheed Martin employees are probably pretty proud of their company today. As other corporations shirk or slash their pension obligations, Lockheed’s paying up in full — and seemingly making a smart investment in employee satisfaction.

Given that stocks are trading some 30 percent below their pre-crash highs, even after the market’s recent rebound, this isn’t a bad time to patch a hole in pension shortfalls.

Doing so might secure the fund’s future while other companies with less courage only delay inevitable shareholder pains. Then again, at the tail end of last year, Lockheed had arguably the largest pension headache of any American company, so maybe this is just the start of Lockheed’s pension pain. 