Lockheed Waiting For The F-35
Lockheed Martin released their third quarter earnings report with some bad news for the near future. While they did well in that period due to more orders for C-130 transports then expected they are very cautious about 2010. The company predicts a decline in revenue for that year and the stock market reacted by knocking a few dollars off their share price.
The major reasons for this new guidance different from that in the Spring of this year is the changes made by the Obama Administration in defense spending. With the restructuring of missile defense and the cancellation of the F-22 and VH-71 programs have affected their future revenue. Not only was it existing programs being removed from the budget but the planned CSAR-X proposal was also ended before it could be released. Lockheed, Sikorsky and Boeing were all hoping to win that contract.
Lockheed will though begin to see higher revenue as the F-35 Joint Strike Fighter (JSF) production kicks in. Starting in 2012 and out the company believes the program will add at least five percent a year to their sales. The aircraft will not only be used by the U.S. Air Force, Navy and Marines but many overseas Allies and customers. Total production on the aircraft could be as high as 5,000 which would be a significant boost to the company.
Lockheed like some of the other large defense contractors in the United States are also being affected by having to catch up their pension plans. This will also have a short term affect on their performance. Over time this issue will be resolved as well.
The last factor that the will help the company is that despite the ending of several programs there are still requirements for them and many will be re-started in different form. This means that opportunities exist to win new work that right now is hard to predict. These may start as soon as the 2011 budget which will help counter some of the currently expected downturn.
Even so the company had $11.06 billion in revenue in the quarter with $797 million in profit. Not really bad numbers overall with total revenue for 2010 predicted at around $47 billion. Unless there is a significant restructuring of defense or government spending the company should be able to keep this performance up.