The news sent shares of Lockheed, the Pentagon's largest supplier and maker of F-35 fighter jets, Aegis missiles and new coastal warships, up nearly 3 percent in premarket trading.
"Overall, we had strong operational performance and program execution across all business areas this quarter, enabling us to increase 2013 financial guidance for operating profit, earnings per share and cash from operations," Chief Executive Marillyn Hewson said in a press release.
Chief Financial Officer Bruce Tanner told reporters that $37 billion (24.1 billion pounds) in budget cuts imposed on the Pentagon earlier this year were having less impact on the company than initially expected. The cuts were part of across-the-board government spending reductions under "budget sequestration."
"Frankly, it's not affecting us as deeply as we thought it would at the start of the year when sequestration was first implemented," he said.
Tanner said Lockheed was seeing some effect on revenue but did not expect the impact to rise to his earlier calculation that revenue could be reduced by $825 million.
He said the military was "taking the lion's share of that hit," as the Pentagon reduced its funding for operations, maintenance and keeping troops ready for conflict.
Lockheed is keeping a close eye on the 2014 budget deliberations on Capitol Hill, but Tanner said the company still was not sure whether - and to what extent - sequestration cuts would be imposed again in fiscal 2014, which begins October 1.
"We're back in the same situation where we're not certain whether sequestration will take place or not," he said.
Hewson told reporters the company's biggest program, the F-35 fighter jet, enjoyed strong support from the Pentagon and international buyers.
She said Lockheed was making "good progress" in talks with the Pentagon about the next two batches of F-35 fighter jets and hoped to complete an agreement in the near term.
Lockheed is building three models of the F-35 for the U.S. military and eight international partner countries - Britain, Australia, Canada, Norway, Turkey, Italy, Denmark and the Netherlands. Israel and Japan have also ordered the jet.
Hewson said Lockheed's first coastal warship, the USS Freedom, was performing well overall on its first major foreign deployment in Singapore, despite a recurring problem with its generators that sent the ship back to port over the weekend.
She said the issue was typical of those faced by the first in a new class of warships, and Lockheed had implemented measures to improve the reliability of the generators.
Lockheed said it now expects earnings per share of $9.20 to $9.50 for the full year, up 4 percent from its April guidance. It left its revenue forecast unchanged at $44.5 billion to $46 billion.
The company reported second-quarter net earnings of $859 million, up from $781 million a year earlier. Earnings per share rose to $2.64 from $2.38.
Revenues fell 4 percent to $11.4 billion.
Analysts polled by Thomson Reuters I/B/E/S had expected earnings of $2.20 per share on revenue of $11.1 billion.
Revenue was down or flat in four of Lockheed's five operating units. The exception was missiles and fire control, where sales rose 11 percent.
Operating profit was lower in aeronautics, information systems and space business units, but grew significantly in missiles and fire control and mission systems.
Lockheed said its Missions Systems and Training division lifted its operating profit by $80 million, or 41 percent.
(Reporting by Andrea Shalal-Esa; Editing by Stephen Coates and John Wallace)
By Andrea Shalal-Esa