(Adds Japan fighter comment, updates shares)
By Mike Stone and Rachit Vats
April 24 (Reuters) - Lockheed Martin Corp, the Pentagon's No. 1 weapons supplier, did not raise its 2018 cash flow projections on Tuesday even as the U.S. government spends more on defense, disappointing investors and pushing its shares lower.
Lockheed reported a better-than-expected quarterly profit and raised its full-year forecast, helped in part by higher sales of its stealthy F-35 combat jets.
The company's shares, however, fell 6.1 percent to $336.49 on the cash flow predictions amid a broader market sell-off. Its chief financial officer told Wall Street analysts on a conference call that pension contributions could cause "negative cash from operations in the second quarter."
The outlook for annual cash flow was the only major financial category that Lockheed did not revise higher.
"There could be some modest disappointment that the cash guidance has not been raised, but it is early in the year and cash is trickier to predict," analyst Robert Stallard of Vertical Research said in a note.
Revenue from the company's aeronautics business, which makes the F-35 jet, rose 6.7 percent to $4.4 billion. The business accounted for about 38 percent of total revenue in the quarter.
The F-35 jet is central to the company's growth and already delivers about a quarter of its sales.
The program has been in the news recently after Reuters reported this month that the U.S. Department of Defense stopped accepting most deliveries of the F-35 over a dispute about who will cover costs for fixing a production error.
The dispute centers around whether Lockheed or its customer should pay what a source said was $119 million to fix a corrosion issue discovered last year. The source spoke on condition of anonymity.
Lockheed confirmed on April 11 that the Pentagon had halted deliveries of the jet over a contractual issue, but did not give further details.
"It's just a temporary suspension that they have on accepting some aircraft until we reach agreement on a contractual issue," Chief Executive Marillyn Hewson told analysts. Lockheed's finance chief said the hold encompassed less than 10 jets as of Tuesday.
"This was a good operating quarter from Lockheed, with an operations/tax boost to the earnings per share," Stallard said in his note.
Looking forward, Hewson said Lockheed and the U.S. government were "exploring options that we could bring forward to" Japan for a future jet fighter. Last week Reuters reported Lockheed planned to offer Japan a stealth fighter design based on its export-banned F-22 Raptor and advanced F-35 Lightning II aircraft. [nL3N1RX2AF}
Following the U.S. tax law change passed last year, Lockheed reported its effective tax rate was 14.9 percent, compared with 23.8 percent for the year-ago quarter. The rate was helped in part by a $1.5 billion contribution to the company's pension plan this quarter.
Profits were up at Lockheed's Missiles and Fire Control business unit, as well as its Rotary and Mission Systems business unit, which makes Sikorsky helicopters. The Space unit's profits fell modestly from 12 percent to 11.3 percent in part because of lower sales of a space-based infrared sensor system.
The Bethesda, Maryland-based company raised its 2018 net sales forecast to a range of $50.35 billion to $51.85 billion from a range of $50 billion to $51.50 billion.
Full-year profit is expected to rise between $15.80 and $16.10 per share, compared with its earlier estimate of $15.20 to $15.50 per share.
Net income rose to $1.16 billion, or $4.02 per share, in the first quarter ended March 25 from $789 million, or $2.69 per share, a year earlier.
Net sales rose to $11.64 billion from $11.21 billion.
Analysts were expecting an adjusted profit of $3.40 per shares and revenue of $11.6 billion, according to Thomson Reuters I/B/E/S.
Up to Monday's close, Lockheed's shares had risen 31.3 percent in the past 12 months, compared with a 13.7 percent rise in the S&P 500 index. (Reporting by Mike Stone in Washington and Rachit Vats in Bengaluru Editing by Dan Grebler and Tom Brown)