Lockheed Martin trims earnings outlook, sales miss

Lockheed Martin, the US defence contractor, reported disappointing first-quarter sales and lowered it full-year earnings outlook on Tuesday but modestly lifted its sales guidance.

The Maryland-based defence contractor said net sales rose nearly 7 per cent to $11.06bn, below estimates of $11.2bn. Meanwhile, profits slid to $763m or $2.61 a share in the three months ending on March 26, compared with $898m or $2.91 a share in the year ago period. Earnings of $2.61 a share from continuing operations were also shy of Wall Street expectations of $2.79 a share.

The results reflected two charges, a $120m charge recorded at its Rotary and Mission Systems division for a program to design and install an integrated air missile defense system for an international customer and a $64m asset impairment charge on an equity investment. Separately, the net earnings from continuing operations included a special charge of $80m tied to workforce reductions at the company’s Aeronautics division.*

“While our net earnings were impacted by certain adjustments, we increased our outlook for full year cash from operations by $300m to at least $6bn and we continue to position the company to deliver outstanding value to customers and shareholders,” chief executive Marillyn Hewson, said.

Lockheed also lowered its full-year earnings guidance to a range of $12.15 to $12.45 a share, compared with its initial outlook of between $12.25 to $12.55 that it delivered in January. However, it modestly lifted its sales projections for the year.

“Investors are apt to be disappointed by Lockheed’s Q1 “miss” & ’17 guide tweak despite solid underlying ops and cash since they break the chain of “beat & raise” quarters,” Cai von Rumohr, an analyst at Cowen, said.

The results come a day after the Government Accountability Office said that “cascading F-35 testing delays” could costs the Department of Defense $1bn more than it has currently budgeted. “Program officials estimate that a delay of 5 months will contribute to a total increase of $532 million to complete development,” according to the report. “The longer delay estimated by GAO will likely contribute to an increase of more than $1.7 billion, approximately $1.3 billion of which will be needed in fiscal year 2018.”

Lockheed has pledged to save its F-35 customers more than $5bn over 20 years on a programme that was criticised by Donald Trump over its high costs.

So-called war stocks have seen their shares rally under Mr Trump as the president has moved to increased the US defence budget and amid rising geopolitical tensions. Mr Trump has also pressured Nato members to shoulder their own defence burdens.

Lockheed, which hopes to draw 30 per cent of its total sales overseas in the next few years, has previously noted that if Nato members fulfill their pledges to spend 2 per cent of their GDP on defence it could result in a $100bn boost in spending across organisation.

Lockheed shares, which have climbed nearly 11 per cent so far this year, fell nearly 4 per cent in pre-market trading to $265.32.

Note: Piece amended to clarify charges associated with Lockheed results.