Lockheed Martin profit beats, but company trims sales outlook on virus hit
(Reuters) – Lockheed Martin (LMT.N) reported better-than-expected quarterly profit on Tuesday, helped by higher sales in its aeronautics business that makes the F-35 fighter jets, but lowered its 2020 sales outlook due to coronavirus-led supply chain delays.
The company said it now expects full-year sales in a range of $62.25 billion to $64.00 billion, down from $62.75 billion to $64.25 billion, forecast previously. Lockheed reaffirmed its 2020 earnings per share forecast of $23.80 – the mid point of the range.
Lockheed’s earnings announcement disclosed that while earnings for the first quarter had not been impacted, “the corporation is beginning to experience some issues in each of its business areas related to COVID-19” such as location access and supplier delivery delays.
The Pentagon’s chief weapons buyer said on Monday that a three-month slowdown was now expected on major defense programs as a result of supplier operating challenges during the coronavirus pandemic.
Lockheed said production and supply chain activities had slowed in its aeronautics business due to the COVID-19 pandemic, forcing it to trim its sales outlook. Lockheed’s Aeronautics division, which makes the F-35 fighter jet, saw quarterly sales up 14% in the quarter to $6.4 billion.
However, the U.S. defense sector is expected to see much less COVID-19 disruption due to generally stable cash flows compared with industrial markets, according to analysts. Early on in the pandemic the defense industry was deemed essential, giving those workers an avenue to continue production.
“While defense companies like Lockheed Martin are not immune to coronavirus, the projected impact on the 2020 results looks very minor compared to what is likely to be seen elsewhere in the industrial sector,” analyst Robert Stallard of Vertical Research wrote in a note on Tuesday.
Stable demand along with the Pentagon increasing interim payments to defense contractors, and also paying them for sick time or quarantined employees are expected to buoy the defense industry as coronavirus hits the economy.
Shares of Lockheed rose 1% to $388 in premarket trading.
Net earnings rose to $1.72 billion, or $6.08 per share, in the first quarter ended March 29, from $1.70 billion, or $5.99 per share, a year earlier, beating analysts’ average estimate of $5.80 per share.
Revenue rose 9.2% to $15.65 billion and topped analysts’ expectation of $15.08 billion.
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