Lockheed Martin Sets Modest Sales Expectations as Pandemic Weighs on Spending

Lockheed Martin Corp. (LMT) said it expects sales to rise about 3% next year as the world's largest defense company provided a first look at the impact of slowing military budget growth.

The company said Tuesday that it expects sales to be at or above $67 billion in 2021 as it reported forecast- beating quarterly earnings and boosted 2020 guidance following a rise in its order backlog to a record $150 billion.

The defense industry has been one of the U.S. economy's most-resilient sectors during the pandemic, with its designation as an essential industry allowing plants to avoid shelter-in-place orders. The Pentagon also has accelerated contract payments to help the sector's smaller suppliers.

But the U.S. defense budget is forecast by analysts to grow in the low single digits over the next several years, with a rising federal deficit from spending to tackle the coronavirus pandemic hitting investment in military spending.

Lockheed Martin's (LMT) third-quarter profit rose to $1.7 billion, from $1.6 billion a year earlier, and per-share earnings climbed to $6.28 from $5.70, above the $6.09 consensus among analysts polled by FactSet. Sales rose to $16.5 billion from $15.2 billion.

Lockheed Martin (LMT) said its 2021 guidance assumed it was compensated for pandemic-related costs, which analysts have estimated to be around $2.5 billion.

Its shares rose about 0.25% in premarket trade.

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

By Doug Cameron

Lockheed Martin Corp. (LMT) said it expects to deliver the first new presidential helicopter next year as part of a $5 billion refresh of the White House fleet, part of a modest rise in military spending that the company anticipates in coming years.

The helicopter is being built by the company's Sikorsky arm, which has emerged as a key growth driver for Lockheed Martin (LMT). The company on Tuesday forecast that sales would rise by just 3% next year as federal budget pressures weigh on domestic military spending.

The defense industry has been one of the U.S. economy's most resilient sectors during the pandemic, with its designation as an essential industry allowing plants to avoid shelter-in-place orders. The Pentagon also has accelerated contract payments to help the sector's smaller suppliers.

But the U.S. defense budget is forecast by analysts to grow in the low-single digits over the next several years, effectively shrinking slightly in real terms, with a rising federal deficit from spending to tackle the coronavirus pandemic hitting investment in military spending.

Lockheed Martin (LMT) is building 23 helicopters for the Marine Corps to transport the president, vice president, cabinet members and other dignitaries. A previous effort to replace "Marine One" -- so designated when the president is on board -- was abandoned in 2009 after costs doubled.

Ken Possenriede, Lockheed Martin's (LMT) chief financial officer, said in an interview that operational testing of the VH-92A helicopters was close to completion. The program has remained broadly on time and on budget despite issues including its communications system and scorching of the White House lawn during evaluation flights.

The Navy is due to decide in January when the helicopters can become part of the presidential helicopter fleet, according to the Government Accountability Office. The Pentagon didn't immediately respond to a request to comment.

Mr. Possenriede said earlier this year that he expects Sikorsky's sales to double over the next decade, helped by big contracts for the Navy and the U.S. Air Force, as well as overseas sales.

Lockheed Martin (LMT) provided a look at the impact of slowing military budget growth as it reported forecast-beating quarterly profits and initial 2021 guidance. The company said it expects sales to be at or above $67 billion in 2021, below analysts' expectations, even as its order backlog climbed to a record $150 billion at the end of the quarter.

Its shares fell about 2.5%.

Lockheed Martin's (LMT) third-quarter profit rose to $1.7 billion, from $1.6 billion a year earlier, and per-share earnings climbed to $6.25 from $5.70. Sales rose to $16.5 billion from $15.2 billion.

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


  (END) Dow Jones Newswires
  10-20-20 0826ET
  Copyright (c) 2020 Dow Jones & Company, Inc.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.