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Lockheed shares drop 3.5 pct after completing spin-off

A U.S. Air Force F16 Fighting Falcon jet developed by Lockheed Martin Corp.
SeongJoon Cho | Bloomberg | Getty Images
A U.S. Air Force F16 Fighting Falcon jet developed by Lockheed Martin Corp.

Shares of Lockheed Martin closed more than 3.5 percent lower Tuesday after it announced the separation of its IT services business.

"It'll be somewhat dilutive to earnings but it allows them to exit a lower-margin business they felt was structurally impaired to some degree and allows them to focus on the manufacturing side of the business," said Joseph DeNardi of Stifel Nicolaus, which has a "hold" rating on the stock.

The aerospace and defense company said Tuesday afternoon it successfully closed a transaction to separate and combine its Information Systems and Global Solutions business segment with Leidos, an applied technology firm which works in national security.

Lockheed said in a release it expected the transaction with Leidos to result in repurchase of 9.4 million shares of Lockheed Martin common stock.

The deal was originally announced in January and shares of Lockheed gained in anticipation of closure. Despite Tuesday's decline, the stock is up more than 18 percent year-to-date.

Shares of Leidos fell in the months ahead of the deal's completion and are down 8.1 percent year-to-date despite gaining nearly 2.9 percent Tuesday.