Lockheed Martin Corp , the world's largest defense contractor, posted a higher-than-expected quarterly profit on Tuesday as revenue rose and margins improved.

The company raised its full-year profit forecast, citing share repurchases and a better performance in its government satellite business.

Net earnings in the second quarter rose to $825 million, or $2.22 a share, from $734 million, or $1.88 a share, a year earlier.

Excluding results for Pacific Architects and Engineers Inc -- one of two units the company plans to sell -- profit from continuing operations came to $1.96 a share. The company said it expected to sell PAE, which it included in discontinued operations, by year's end.

Analysts on average expected $1.78 a share, according to Thomson Reuters I/B/E/S.

Quarterly sales rose 3 percent to $11.44 billion.

The company's four segments posted sales increases but operating profit fell in the aeronautics division, hurt by lower sales of Lockheed's F-22 Raptor fighter jet and weakness in a development contract tied to the F-35 Joint Strike Fighter program.

J.P. Morgan analyst Joseph Nadol cited better-than-expected margins in the space systems division, which was aided by higher sales of government satellite programs, in a morning note to clients.

Lockheed said it now expected a profit of $7.15 to $7.35 a share from continuing operations for this year, compared with a prior forecast of $7 to $7.20 a share.

It cut its 2010 sales forecast to $45.5 billion to $46.5 billion from the prior range of $46.3 billion to $47.3 billion, citing the removal of results for the PAE business.

(Reporting by Karen Jacobs; Editing by Lisa Von Ahn and Maureen Bavdek)