Lockheed Martin (LMT) reported strong Q3 earnings Tuesday and guided higher for 2020 but offered an initial 2021 revenue outlook that was weak. Lockheed stock rose.
Estimates: Analysts see Lockheed earnings rising 7.2% to $6.07 per share with revenue up 7% to $16.34 billion.
Results: EPS from continuing operations of $6.25 on revenue of $16.4 billion. Aeronautics revenue grew 8% to $6.68 billion on higher F-35 production. Missiles and fire control revenue climbed 14% to $2.97 billion. Rotary and mission systems revenue, which includes Sikorsky helicopters, rose 8% to $4 billion. Space revenue, which includes its rocket joint venture with Boeing (BA), increased 6% to $2.85 billion, led by satellite and hypersonic programs.
Outlook: Lockheed now sees full-year EPS of $24.45, up from a prior view of $23.75-$24.25, on revenue of $65.25 billion, up from a prior view of $63.5 billion- $65 billion. Currently, analysts see full-year EPS of $24.13 on revenue of $64.76 billion.
Management also sees 2021 revenue to meet or exceed $67 billion. Analysts see $68.1 billion. Cash from operations is seen at $8.1 billion in 2021, after pension contributions.
Lockheed added that its 2020 and 2021 forecasts assume no significant work stoppages and supply chain disruptions from Covid-19 as well as the ability to recover costs from the federal government and that funding priorities don’t change.
Stock: Shares rose 0.3% to 385.00 on the stock market today. Lockheed stock is forming a flat base with a 402.48 entry point, according to MarketSmith chart analysis. Shares of F-35 subcontractor Northrop Grumman (NOC) was quiet early Tuesday, and engine supplier Raytheon Technologies (RTX) added 0.4%. Boeing added 0.8%.
Diplomatic breakthroughs in the Middle East have raised hopes for more foreign military sales to allies there. After Israel improved relations with the United Arab Emirates earlier this year, reports said the U.S. would allow F-35 sales to the UAE. Qatar has also requested to buy the F-35. But Israeli officials have objected, citing the need to maintain military superiority in the region.
The pandemic has also slowed production of the F-35, which is Lockheed’s top money maker.
In May, Lockheed announced it was slowing production and delivery of its F-35 stealth fighters as the coronavirus pandemic continues to weigh on its suppliers. The defense contractor also warned it could delay the delivery of up to two dozen fighters over parts shortages.
Then last month, Lockheed said F-35 deliveries postponed by the pandemic won’t fully recover until the end of 2021 as its supply chain is taking longer to recover.
Meanwhile, the Pentagon has made hypersonic weapons a priority as China and Russia show off their latest missiles and Lockheed is leading the charge in developing the new weapons. Hypersonic weapons fly five times the speed of sound in unpredictable flight paths, making them difficult to defend against.
Last month, the Defense Advanced Research Projects Agency said that hypersonic weapons from Lockheed and Raytheon are ready for powered test flights by the end of the year.
Follow Gillian Rich on Twitter @IBD_GRich for defense news and more.
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