We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Lockheed Martin Act on Trump's F-35 Cost Cut Plans?
Read MoreHide Full Article
In his attempt to make Lockheed Martin Corp.’s (LMT - Free Report) “overtly expensive” F-35 fighter jets affordable, President Donald Trump recently announced plans to reduce the cost of 90 such planes by $600 million. In the absence of any response from Lockheed Martin, no notable movement could be observed in the company’s share price. This also reflects investors’ indifference toward Trump’s comments.
This announcement follows a series of comments by the President on Pentagon’s largest contractor over the past few months. Trump has always viewed F-35 as an exorbitantly expensive project by Lockheed Martin. In Dec 2016, Trump had even slammed the company for its 'tremendously' costly F-35 program and urged its aerospace rival The Boeing Company (BA - Free Report) to 'price out' its F-18 Super Hornet (read more: Will Trump's Tweet Spark a War between Lockheed & Boeing?).
What did Trump Say?
In an executive order signing ceremony at the White House, Trump informed reporters that his administration has slashed the cost of 90 F-35 jets out of the 3,000 planes that have been ordered by the U.S. government. Trump attributed these figures to Lockheed chief executive Marillyn Hewson.
Trump also stated that after a month of negotiation with Lockheed Martin, he has finally managed to reach at a suitable solution. He strongly believes that this cost cut will save “billions and billions of dollars” for the U.S. government.
How did Lockheed Martin React?
Management at Lockheed Martin has however neither confirmed nor refuted the President’s statement.
Instead, the company appreciated Trump’s acknowledgement of its progress in delivering F-35 at a lower cost.
Our View
As the F-35 project has been grappling with some technical challenges over the past few years, Lockheed Martin has been facing a lot of criticism of late. Also, Michael Gilmore, director of operational test and evaluation of the Department of Defense (“DoD”), blamed Pentagon officials for preparing a deceptive review of F-35’s progress, last month. (Read more: Will Trump's Victory Spell Doom for Lockheed Martin's F-35?)
In fact, Lockheed Martin’s CEO had also failed to convince Trump about how the company has been working on bringing down the cost of the F-35 fighter jet and “delivering an affordable aircraft.
Amid the uncertainties, Trump’s statement is quite startling.
However, the viability of the cost cut is in question as Lockheed Martin has not confirmed the figures. Also, he didn’t mention anything related to the availability of the lower cost planes.
Nevertheless, if Trump acts on his plans, this will have a marked impact on Lockheed Martin’s results. Also, aerospace majors like Northrop Grumman Corp. (NOC - Free Report) , BAE Systems plc (BAESY - Free Report) and United Technologies Corporation will also be affected as they are joint developers of the program.
Notably, F-35 is the world's largest defense program built by some of the leading companies in the aerospace-defense space. To date, the U.S. government has awarded low-rate initial production contracts for smaller batches of F-35 jets, partly because of the huge costs associated with it. Meanwhile, if Lockheed Martin reduces the cost, the government may place larger orders which in turn will boost the company’s profits.
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Will Lockheed Martin Act on Trump's F-35 Cost Cut Plans?
In his attempt to make Lockheed Martin Corp.’s (LMT - Free Report) “overtly expensive” F-35 fighter jets affordable, President Donald Trump recently announced plans to reduce the cost of 90 such planes by $600 million. In the absence of any response from Lockheed Martin, no notable movement could be observed in the company’s share price. This also reflects investors’ indifference toward Trump’s comments.
This announcement follows a series of comments by the President on Pentagon’s largest contractor over the past few months. Trump has always viewed F-35 as an exorbitantly expensive project by Lockheed Martin. In Dec 2016, Trump had even slammed the company for its 'tremendously' costly F-35 program and urged its aerospace rival The Boeing Company (BA - Free Report) to 'price out' its F-18 Super Hornet (read more: Will Trump's Tweet Spark a War between Lockheed & Boeing?).
What did Trump Say?
In an executive order signing ceremony at the White House, Trump informed reporters that his administration has slashed the cost of 90 F-35 jets out of the 3,000 planes that have been ordered by the U.S. government. Trump attributed these figures to Lockheed chief executive Marillyn Hewson.
Trump also stated that after a month of negotiation with Lockheed Martin, he has finally managed to reach at a suitable solution. He strongly believes that this cost cut will save “billions and billions of dollars” for the U.S. government.
How did Lockheed Martin React?
Management at Lockheed Martin has however neither confirmed nor refuted the President’s statement.
Instead, the company appreciated Trump’s acknowledgement of its progress in delivering F-35 at a lower cost.
Our View
As the F-35 project has been grappling with some technical challenges over the past few years, Lockheed Martin has been facing a lot of criticism of late. Also, Michael Gilmore, director of operational test and evaluation of the Department of Defense (“DoD”), blamed Pentagon officials for preparing a deceptive review of F-35’s progress, last month. (Read more: Will Trump's Victory Spell Doom for Lockheed Martin's F-35?)
In fact, Lockheed Martin’s CEO had also failed to convince Trump about how the company has been working on bringing down the cost of the F-35 fighter jet and “delivering an affordable aircraft.
Amid the uncertainties, Trump’s statement is quite startling.
However, the viability of the cost cut is in question as Lockheed Martin has not confirmed the figures. Also, he didn’t mention anything related to the availability of the lower cost planes.
Nevertheless, if Trump acts on his plans, this will have a marked impact on Lockheed Martin’s results. Also, aerospace majors like Northrop Grumman Corp. (NOC - Free Report) , BAE Systems plc (BAESY - Free Report) and United Technologies Corporation will also be affected as they are joint developers of the program.
Notably, F-35 is the world's largest defense program built by some of the leading companies in the aerospace-defense space. To date, the U.S. government has awarded low-rate initial production contracts for smaller batches of F-35 jets, partly because of the huge costs associated with it. Meanwhile, if Lockheed Martin reduces the cost, the government may place larger orders which in turn will boost the company’s profits.
Zacks Rank
Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>