Lockheed Martin Corporation LMT 0.02% recently beat its Q2 earnings expectations and raised its guidance. However, Citi Research analyst Jason Gursky believes that the company’s announcement that it intends to buy Sikorsky and spin off or sell part of its services business will be far more impactful than Lockheed’s quarterly earnings beat.

Portfolio Shuffle

Although the decision to acquire Sikorsky and the decision to cut back on the services business are separate decisions, Gursky sees the moves as a “portfolio shuffle.” Lockheed will essentially be replacing about $6 billion of low-margin services business with higher-margin product sales, a positive for the company’s bottom line.

The Deal

Lockheed’s acquisition of Sikorsky is…

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