Lockheed Martin beats estimates, raises sales forecast on higher F-35 deliveries


Global aerospace, defence, security, and advanced technologies company Lockheed Martin Corp, is forecasting 2020 revenue above analysts’ estimates as the Pentagon’s number one weapons supplier’s late 2019 results benefited from better jet and missile sales and heightened geopolitical tensions in the Middle East.

U.S.-Iran tensions over the past few months have helped build momentum for defence purchases, benefiting Lockheed and other weapons makers, analysts have said. One business unit, Missiles and Fire Control, saw sales up 14% in the quarter on higher volume for higher tactical and strike missiles.

Shares of the company rose about 4.5% to a record high on January 3 after a U.S. drone strike killed Iranian military commander Qassem Soleimani.

Defence contractors General Dynamics, Lockheed and Northrop Grumman Corp are expected to outperform this year, in line with the sector’s general pattern during presidential election years.

During the quarter the Pentagon announced pricing details for its agreement with Lockheed that lowers the cost of the F-35A jets it plans to purchase through 2022 by 12.7%.

Lockheed’s Aeronautics division, which makes the F-35, saw quarterly sales up 9% in the quarter to $6.3bn.

The F-35 comes in three configurations, the A-model for the U.S. Air Force and U.S. allies; a F-35 B-model which can handle short takeoffs and vertical landings; and carrier-variant F-35C jets for the U.S. Navy.

Under the agreement, which began as a handshake in June, the F-35A, the most common version of the aircraft, will each cost $82.4m in 2020, $79.17m in 2021 and $77.9m in 2022.

The agreement means the U.S. government and allies plan to purchase 478 F-35 fighter jets at a cost of $34bn over the three years. Because Congress has yet to approve budgets for future years agreement represented pricing “options” for the U.S..

The F-35 programme, which makes up about 25% of Lockheed’s annual revenue, delivered a total of 134 of the stealthy jets in 2019 and aims to deliver 141 F-35s in 2020.

Lockheed said it expects 2020 earnings per share to be in the range of $23.65 per share to $23.95 per share, below analysts’ expectation of $24.30 per share, according to IBES data from Refinitiv. In the past Lockheed has begun the year with a modest forecast and outperforms as the year goes on.

Net earnings rose to $1.5 bn, or $5.29 per share, in the fourth quarter ended Dec. 31, from $1.25bn, or $4.39 per share, a year earlier.

Analysts, on average, had expected the company to post a profit of $5.03 per share.

Net sales rose 10.2% to $15.88bn, below analysts’ expectation of $15.29bn.

The company said its tax rate was 18.2% and 14% in the quarter and year ended Dec. 31, 2019, compared to 15.5% and 13.6% in the quarter and year ended Dec. 31, 2018.

The story was first published by Reuters

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