Lockheed’s 2019 Sales Forecast Bodes Well for Defense Spending

(Bloomberg) -- Lockheed Martin Corp. expects sales to grow as much as 6 percent next year, the first glimpse into the world’s largest defense contractor’s forecast for 2019. Cash from operations is expected to double.

Analysts had expected 5 percent revenue growth, and are looking to Lockheed to calm concerns that defense spending peaked in fiscal 2018 as the U.S. budget deficit balloons.

  • Third quarter earnings per share were $5.14, a hefty beat over the $4.30 a share average of analysts’ estimates compiled by Bloomberg.

Key Insights

  • Lockheed expects a strong finish to 2018, raising its annual earnings forecast to about $17.50, compared with the previous outlook of $17.05 or less. Douglas Rothacker, an analyst with Bloomberg Intelligence, has said this year may mark the beginning of a profit-margin upswing after years of contraction.
  • As the first major defense contractor to report earnings, Lockheed sets the pace for peers like Boeing Co., General Dynamics Corp., Northrop Grumman Corp. and Raytheon Co., which will report later this week.
  • The Bethesda, Maryland-based company delivered 20 F-35 aircraft during the third quarter, and may have to scramble to reach its goal of shipping 91 of the stealth fighters for the year after the jets were grounded briefly in October.

Market Reaction

  • Shares fell less than 1 percent to $324 in New York premarket trading Tuesday, as global stock markets declined. Through Monday, Lockheed was up 1.8 percent this year, trailing the the 6.1 percent gain of the S&P 500 Aerospace and Defense Index.

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  • Of top interest during Lockheed’s earnings call at 11 a.m., Eastern time, will be any insights into defense spending into the 2020s -- along with any hints as to when F-35 production will peak.
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  • Company statement.

Lockheed’s 2019 Sales Forecast Bodes Well for Defense Spending