Lockheed Rides Rise in Military Sales -- WSJ

By Doug Cameron

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 24, 2018).

Lockheed Martin Corp. eased concerns Tuesdays about the defense industry's growth prospects, heading toward what many analysts expect could mark a peak next year for U.S. military spending.

The world's largest defense contractor forecast revenue would rise by up to 6% in 2019 from $53 billion this year as Lockheed boosts production of missiles and F-35 combat jets. The company also played down its exposure to arms sales to Saudi Arabia.

Concerns about growth and profit margins have weighed on defense stocks this year, leaving a sector that had outperformed the broader market for five years struggling to keep parity with the main indexes.

Boeing Co, Northrop Grumman Corp. and Raytheon Co, are all due to report earnings this week as well.

Lockheed has benefited from a two-year increase in military spending that has added $75 billion for equipment and services to the U.S. budget. Pentagon leaders have said they need to improve military readiness and launch new programs in areas such as hypersonic missiles and cybersecurity.

However, President Trump last week signaled potential across-the-board spending cuts next year. After upcoming U.S. midterm elections, a new Congress could reverse recent spending increases.

Lockheed chief executive Marillyn Hewson, who met the president at an industry roundtable last week, said on an investor call Tuesday that his remarks didn't necessarily imply a cut in Pentagon spending.

Ms. Hewson said Lockheed continued to work with the U.S. government on an estimated $28 billion in potential long-term deals with Saudi Arabia.

Mr. Trump has resisted calls to curb U.S. arms sales to Saudi Arabia after Turkish officials alleged the kingdom killed journalist Jamal Khashoggi in its Istanbul consulate on Oct. 2. Mr. Trump said the planned deals are vital for American companies and jobs. "I'd rather keep the million jobs, and find another solution," he said at the industry roundtable.

Lockheed Chief Financial Officer Bruce Tanner said the company didn't know when it might receive an order for Thaad missile defense systems from Saudi Arabia that the U.S. government is brokering. Lockheed had previously said it expected a contract that analysts have estimated could be worth $10 billion this year. Tanner said Lockheed expects to have around $500 million in sales to the kingdom next year and $900 million in 2019.

Lockheed said it expects its closely watched operating cash-flow to be stable around $7 billion in each of the next three years. The company reported forecast-beating profits of $1.47 billion for the quarter to Sept. 30 compared with $963 million a year earlier, with per-share earnings rising to $5.14 from $3.32. Its order backlog rose to $109 billion.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

October 24, 2018 02:47 ET (06:47 GMT)

Northrop Grumman (NYSE:NOC)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024