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Lockheed (LMT) Lowers Delivery Forecast for F-35: Shares Down
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Lockheed Martin Corp (LMT - Free Report) shares dropped 4.8% in the last trading session to reach $423.94 on Sep 6, 2023, thereby reflecting investors’ disappointment in this stock following the company’s revelation of lowered delivery outlook figures for F-35 jets.
Per a recent filing, Lockheed now expects to deliver 97 F-35 jets in 2023, revised downward from its earlier projection in the range of 100-120 jets.
Rationale Behind the Trimmed Outlook
In light of the continuously changing dynamics of the defense structure, Lockheed continuously upgrades and modernizes its products with the latest technology to effectively meet the growing demand for technologically advanced arms and weapons.
LMT’s highly coveted stealth military aircraft, F-35 jets, are undergoing a technology upgrade with Technology Refresh 3 (TR-3), which involves hardware and software upgrades to improvise its display, memory and computer processing power. These efficiencies will lead to improved sensors for the jet, as well as the capability to transport an increased number of long-range precision munitions, enhanced data integration, heightened compatibility with other systems and cutting-edge electronic warfare capabilities.
Considering the aforementioned discussion, once the TR-3-upgraded F-35 jets are delivered, LMT will gain financially in terms of solid revenues. However, the company currently expects a delay in the process of this technology upgrade, which has resultantly shifted the first jet delivery with the TR-3 upgrade from 2023 to a period between April and June 2024. This has led Lockheed to trim its F-35 delivery numbers for 2023.
Growth Prospects
LMT’s management believes that this reduced delivery outlook for F-35 jets will not have any material impact on its 2023 financial guidance. Moreover, the company continues to manufacture F-35 aircraft at a rate of 156 per year and expects to continue at that pace while simultaneously working to finalize TR-3 software development and testing.
This, along with the U.S. government's current inventory target of 2,456 F-35 aircraft, reflects the solid demand Lockheed Martin continues to enjoy for this stealth jet. This can be expected to boost its revenue growth prospects in the coming years.
Amid ongoing geopolitical tensions worldwide, the successful integration and timely delivery of TR-3 upgraded F-35 jets can be projected to boost the demand for this lethal combat aircraft even more in the days ahead, thereby bolstering LMT’s top line.
Peers to Benefit
Other defense companies that play a significant role in manufacturing the F-35 jet and thus are likely to enjoy the perks of the increased demand for F-35 aircraft are as follows:
Northrop Grumman (NOC - Free Report) : Northrop Grumman supplies many key technologies for the F-35 jet like the AN/APG-81 Active Electronically Scanned Array fire control radar, center fuselage, AN/AAQ-37 Distributed Aperture System as well as mission systems and mission-planning software. It also provides sustainment and modernization support to F-35 users.
The long-term earnings growth rate of NOC stands at 4.1%. The consensus estimate for Northrop Grumman’s 2023 sales indicates a growth rate of 5.6% from the prior-year reported figure.
RTX Corporation (RTX - Free Report) : Its business unit, Pratt & Whitney, has been manufacturing and sustaining the F135 engine for the F-35 Joint Program to power the single-engine F-35 Lightning II aircraft. Moreover, RTX’s combat-proven Advanced Medium-Range Air-to-Air Missile air-to-air missile has been integrated into F-35 jets, making it a more lethal combat aircraft.
RTX Corporation has a long-term earnings growth rate of 7.9%. The Zacks Consensus Estimate for RTX’s 2023 sales suggests a growth rate of 9.9% from the prior-year reported figure.
BAE Systems plc (BAESY - Free Report) : The company provides the Vehicle Management Computer, the electronic warfare system, the active inceptor control system and the aft fuselage for every F-35 at manufacturing facilities. BAESY also delivers sustainability, technical support and training services to keep F-35s mission-ready.
It has a long-term earnings growth rate of 14%. The Zacks Consensus Estimate for BAE Systems’ 2023 sales implies a growth rate of 15.7% from the prior-year reported figure.
Price Movement
In the past year, shares of Lockheed Martin have increased 0.8% against the industry’s fall of 4.3%.
Image: Bigstock
Lockheed (LMT) Lowers Delivery Forecast for F-35: Shares Down
Lockheed Martin Corp (LMT - Free Report) shares dropped 4.8% in the last trading session to reach $423.94 on Sep 6, 2023, thereby reflecting investors’ disappointment in this stock following the company’s revelation of lowered delivery outlook figures for F-35 jets.
Per a recent filing, Lockheed now expects to deliver 97 F-35 jets in 2023, revised downward from its earlier projection in the range of 100-120 jets.
Rationale Behind the Trimmed Outlook
In light of the continuously changing dynamics of the defense structure, Lockheed continuously upgrades and modernizes its products with the latest technology to effectively meet the growing demand for technologically advanced arms and weapons.
LMT’s highly coveted stealth military aircraft, F-35 jets, are undergoing a technology upgrade with Technology Refresh 3 (TR-3), which involves hardware and software upgrades to improvise its display, memory and computer processing power. These efficiencies will lead to improved sensors for the jet, as well as the capability to transport an increased number of long-range precision munitions, enhanced data integration, heightened compatibility with other systems and cutting-edge electronic warfare capabilities.
Considering the aforementioned discussion, once the TR-3-upgraded F-35 jets are delivered, LMT will gain financially in terms of solid revenues. However, the company currently expects a delay in the process of this technology upgrade, which has resultantly shifted the first jet delivery with the TR-3 upgrade from 2023 to a period between April and June 2024. This has led Lockheed to trim its F-35 delivery numbers for 2023.
Growth Prospects
LMT’s management believes that this reduced delivery outlook for F-35 jets will not have any material impact on its 2023 financial guidance. Moreover, the company continues to manufacture F-35 aircraft at a rate of 156 per year and expects to continue at that pace while simultaneously working to finalize TR-3 software development and testing.
This, along with the U.S. government's current inventory target of 2,456 F-35 aircraft, reflects the solid demand Lockheed Martin continues to enjoy for this stealth jet. This can be expected to boost its revenue growth prospects in the coming years.
Amid ongoing geopolitical tensions worldwide, the successful integration and timely delivery of TR-3 upgraded F-35 jets can be projected to boost the demand for this lethal combat aircraft even more in the days ahead, thereby bolstering LMT’s top line.
Peers to Benefit
Other defense companies that play a significant role in manufacturing the F-35 jet and thus are likely to enjoy the perks of the increased demand for F-35 aircraft are as follows:
Northrop Grumman (NOC - Free Report) : Northrop Grumman supplies many key technologies for the F-35 jet like the AN/APG-81 Active Electronically Scanned Array fire control radar, center fuselage, AN/AAQ-37 Distributed Aperture System as well as mission systems and mission-planning software. It also provides sustainment and modernization support to F-35 users.
The long-term earnings growth rate of NOC stands at 4.1%. The consensus estimate for Northrop Grumman’s 2023 sales indicates a growth rate of 5.6% from the prior-year reported figure.
RTX Corporation (RTX - Free Report) : Its business unit, Pratt & Whitney, has been manufacturing and sustaining the F135 engine for the F-35 Joint Program to power the single-engine F-35 Lightning II aircraft. Moreover, RTX’s combat-proven Advanced Medium-Range Air-to-Air Missile air-to-air missile has been integrated into F-35 jets, making it a more lethal combat aircraft.
RTX Corporation has a long-term earnings growth rate of 7.9%. The Zacks Consensus Estimate for RTX’s 2023 sales suggests a growth rate of 9.9% from the prior-year reported figure.
BAE Systems plc (BAESY - Free Report) : The company provides the Vehicle Management Computer, the electronic warfare system, the active inceptor control system and the aft fuselage for every F-35 at manufacturing facilities. BAESY also delivers sustainability, technical support and training services to keep F-35s mission-ready.
It has a long-term earnings growth rate of 14%. The Zacks Consensus Estimate for BAE Systems’ 2023 sales implies a growth rate of 15.7% from the prior-year reported figure.
Price Movement
In the past year, shares of Lockheed Martin have increased 0.8% against the industry’s fall of 4.3%.
Image Source: Zacks Investment Research
Zacks Rank
Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.