Lockheed Martin Forecasts Increased Revenue as Conflict Elevates Demand
The defense giant heightens sales projections as the Ukraine war propels missile orders
Lockheed Martin has projected a return to growth this year, overturning its earlier expectation of diminishing sales amidst the Ukraine conflict and burgeoning worldwide military budgets.
The company surpassed analysts' expectations in terms of both sales and profit for the second quarter, as polled by FactSet. It also raised its full-year forecast for both indicators. Other defense firms, including RTX (formerly Raytheon Technologies) and Northrop Grumman, will announce their results in the coming week.
How has Lockheed Martin’s economic outlook evolved?
The leading global defense company reported a net profit of $1.68 billion for the quarter ending June 30, compared to $309 million the prior year, the latter affected by a charge on a classified program.
Quarterly sales saw an 8% growth, hitting $16.7 billion, bolstered by substantial orders for its F-35 combat jet and GMLRS and Himars missiles.
Anticipated full-year sales could climb to as high as $66.75 billion, marking a 1.5% increase from Lockheed's prior April guidance. This would surpass the $66 billion in sales generated in 2022.
How is the Ukrainian war catalyzing sales?
Lockheed Martin has enjoyed greater benefits from the Ukraine crisis compared to its competitors, with an increased number of countries purchasing the F-35 and the Patriot missile-defense system, along with rockets and launchers. The company's total outstanding orders have reached a record $158 billion.
The company's missile and fire control unit saw a 24% increase in backlogged orders during the quarter, totaling $34 billion. However, it will take months or even years to convert these orders into sales. Operating profit for the quarter dipped by 11% due to stagnant sales.
Diminished profit margins imply that defense contractors continue grappling with supply chain disruptions, labor shortages, and the ongoing effects of inflation.
What’s the status of the F-35?
The F-35 contributes to 30% of the company's sales and orders are thriving. However, the program still grapples with issues.
The Pentagon has suspended the acceptance of new F-35 deliveries until Lockheed Martin catches up with the installation and testing of the aircraft’s sensor and weapon system upgrades.
What’s the latest on the U.S. defense budget?
Shares of defense companies are closely linked to defense budgets. The significant increase in the Pentagon’s fiscal 2023 spending plan is starting to generate more sales, but an agreement on a 2024 budget is unlikely to be reached before the fiscal year ends on Sept. 30.
The 2024 budget is projected to be similar to the previous year's. Non-defense spending plans and the budget deficit may limit growth in the upcoming years.
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