Lockheed Slashes Guidance After Earnings Miss
Lockheed Martin (LMT) stock rose midday Wednesday on rumors that the company is nearing a $30 billion contract with the Pentagon. LMT stock closed flat on Tuesday after the defense giant reported second-quarter results below analyst expectations and slashed its guidance.
Lockheed and the U.S. Department of Defense reached a “handshake” deal to deliver 375 F-35 fighter jets over three years and net LMT $30 billion, according to reports from Reuters. The agreement will soothe investor concerns. In its Q2 report, Lockheed noted that the inability to land a contract could have a serious impact on its finances.
Defense stocks had rallied on Russia’s Ukraine invasion earlier this year, amid hopes for increased military spending long term. But shares have moved sideways or pulled back. Northrop Grumman (NOC), General Dynamics (GD) and Raytheon Technologies (RTX), all of which report next week, also modestly Wednesday.
The defense contractor reported earnings of $1.16 per share, including charges of $5.16 per share. That’s vs. views for $1.88. Revenue fell 9% to $15.4 billion. Analysts expected $15.98 billion.
Lockheed Martin is best known for making the F-22 and F-35 fighter jets. And it produces an arsenal of helicopters, carriers, ships, drones, missiles, surveillance and defense systems, as well as armored and commercial vehicles. Revenue for its Aeronautics segment, which makes the F-35 fighters, fell to $5.8 billion, down 12% vs. the same quarter the year. LMT’s report noted $790 million in costs and lost sales related to F-35 production contract issues with the U.S. government. The company could also owe $1 billion to third parties if the contract is terminated.
“Until a final agreement is reached or the U.S. Government otherwise provides additional contractual authorization and funding, the company’s results of operations, cash flows, and financial condition will continue to be negatively impacted and the impacts could be material,” Lockheed wrote in the earnings release.
“Although revenue in the period was affected by supply chain impacts and the timing of customer contract negotiations, our cost management initiatives resulted in margin expansion,” CEO James Taiclet said in the announcement. “Moreover, our robust cash generation also continues to provide the resources to invest in building the foundation for future revenue and margin growth opportunities.
However, Lockheed Martin also lowered its guidance. It now expects full-year EPS of about $21.55 per share on $65.25 billion revenue vs. its prior target of $26.70 EPS on $66 billion of revenue.
LMT stock is up more than 1% so far during the trading day. On Monday, Lockheed stock closed below its 200-day line and fully erased all of its gains from its late February spike at the start of the Russia-Ukraine war. LMT’s Wednesday boost has pushed shares just under that key level.
General Dynamics stock ended Tuesday up 2.25%. Raytheon stock, which has a lot of civilian aerospace exposure, climbed 4.18%. Both have wiped out their Russia invasion gains as well. Northrop stock has held up better than its peers and finished the day up 1.67%. On Monday, NOC stock retreated 2.6%, and is trading just below its 50-day line.
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