Rising production of its F-35 combat jets helped Lockheed Martin deliver second quarter results ahead of forecasts.
The world’s largest defense contractor also raised its guidance, with full year diluted earnings per share now expected to come in between $12.30-$12.60, up from the $12.15-$12.45 it was forecasting just three months ago. Net sales are projected to be between $49.8bn-$51bn, compared to its prior estimates of $49.5bn-$50.7bn.
Shares in Lockheed, which set a new record high of $290.06 on Monday, climbed another 0.9 per cent to $291 in early trade on Tuesday.
For the three months to June 25, net sales rose by nearly 10 per cent to $12.68bn, ahead of the $12.42bn the market was expecting.
The gains were powered by the near 20 per cent jump in sales in its all-important aeronautics unit, which includes the F-35 stealth fighter, the world’s biggest defence programme.
Net income fell nearly 8 per cent during the quarter as a result of lost sales following the sale of its IT business last year. Adjusted for this, net income for continuing operations was up 4.7 per cent at $942m, or $3.23 a share, easily topping analysts expectations of $904.1m or $3.01 per share.
The F-35 is Lockheed’s largest source of profit and growth, with the aeronautics business accounting for 41 per cent of total group revenue and operating profits during the second quarter. Lockheed is ramping up production of its latest stealth fighter as the F-35 starts to enters service with US forces and the first of the 11 allies that have also ordered the aircraft.
Unlike any previous combat aircraft programme, Lockheed is continuing to develop the F-35 as it delivers aircraft, which means the early version of the aircraft have limited capabilities and will require upgrading. The jet is in effect a flying super-computer, with each aircraft running more than 8m lines of code.
This approach combined with delays and the rising costs of the programme, has put Lockheed under pressure, including from President Donald Trump, to bring the unit costs of the aircraft down to levels previously agreed with the Pentagon.
Lockheed has delivered 229 F-35s since the first aircraft rolled off the production line in 2011. The company has indicative orders for just under 3,200 aircraft from its 12 customers, although as with most large defence programmes those numbers a
Lockheed said it had delivered 229 F-35s since the first aircraft rolled off the production line in 2011. The company has indicative orders for just under 3,200 aircraft from its 12 countries, although as with most large defence programmes those numbers are susceptible to spending cuts.
Analysts at Stifel, wrote in a note: “Given the size of the programme, a significant degree of Lockheed’s earnings power will be determined by its ability to increase margins on F-35 which is why we’re encouraged by Lockheed again citing higher risk retirements on the programme and a 17.1% incremental margin.”
Lockheed shares are up 16 per cent so far this year, and the company now boasts a market value of more than $84bn. The gains have been largely driven by expectations that defense spending will continue to grow under the Trump administration even if other federal departments are seeing their funding slashed. Tensions with North Korea and turmoil in the Middle East meanwhile have further supported demand.