* Cuts pension income forecast to $475 mln from $650 mln
* Says 2015 revenue could fall as much 4.6 pct
* Forecasts earnings $10.80-$11.10/share vs est $11.49
* Shares fall as much as 2.6 pct (Adds analyst comment, background; updates shares)
By Sagarika Jaisinghani
Jan 27 (Reuters) - Lockheed Martin Corp, the Pentagon's largest arms supplier, forecast 2015 earnings below analysts' estimates due to lower pension income.
Lockheed's shares fell as much as 2.6 percent after the company also forecast revenue to decline by as much as 4.6 percent in 2015, larger than the "low single digit" percentage fall it had estimated in October.
The maker of the F-35 fighter jet, satellites and coastal warships has been hurt as the Pentagon tries to cut about $1 trillion in projected spending from its budget over a decade as required by a 2011 law.
Lockheed's profit was boosted last year by an increase in the discount rate used to calculate the company's pension liabilities that led to large pension incomes.
Lockheed, however, said on Tuesday it expects 2015 pension income of about $475 million, down from its previous estimate of $650 million, due to a lower discount rate.
Lockheed said in October legislative changes would result in a "pension funding holiday" for the company from 2015 to 2017.
"The downside remains limited as Lockheed continues to generate significant cash, which enables plenty of flexibility for the company's aggressive cash deployment strategy," Sterne, Agee & Leach analyst Peter Arment said.
U.S. weapons makers have increased share repurchases and are paying strong dividends to boost stock prices. Lockheed bought back $1.9 billion worth of shares in 2014, Arment said.
Up to Monday's close, the company's stock had risen about 33 percent in the past 52 weeks, compared with a 15 percent rise in the S&P 500 index.
Lockheed forecast 2015 earnings of $10.80-$11.10 per share on revenue of $43.50 billion-$45.00 billion.
Analysts on average were expecting earnings of $11.49 per share on revenue of $44.3 billion, according to Thomson Reuters I/B/E/S.
Revenue rose 8.6 percent to $12.53 billion in the fourth quarter ended Dec. 31, topping the average analyst estimate of $11.89 billion.
Revenue at Lockheed's aeronautics division increased 6 percent to $4.14 billion. The business, the company's largest, makes the F-35 fighter jets, which is the world's most expensive weapons program with an estimated cost of $400 billion.
F-35 production contracts rose by about $260 million in the quarter, the company said.
Net earnings jumped 85 percent to $904 million, or $2.82 per share.
Lockheed's shares were down 2.5 percent at $190.83 in morning trading on the New York Stock Exchange. (Additional reporting by Ankur Banerjee in Bengaluru; Editing by Joyjeet Das and Saumyadeb Chakrabarty)