Lockheed Martin (NYSE:LMT) has projected its 2024 profit below Wall Street estimates, citing disruptions in the supply chain of its largest aeronautics segment responsible for manufacturing F-35 jets. The announcement led to a 3% decline in shares during mid-day trading in New York, with the company’s CEO acknowledging that profits from the F-35 jets could face challenges into the third quarter.
Despite heightened demand for U.S. defense firms amid geopolitical tensions, particularly between China and the Philippines, Russia and Ukraine, and in the Middle East, pandemic-related disruptions in labor and supply chains are impacting the sector. In October, Lockheed Martin disclosed that its production rate suffered due to low availability of processor assemblies, solid-rocket motors, castings, and forgings, with the F-35 program being the most severely affected.
Net sales from the F-35 program experienced a $275 million decline in the fourth quarter compared to the previous year. Final payments for certain F-35s, crucial for the Aeronautics business’ margin, were delayed due to a software update on recently built jets requiring final testing and approval. CEO Jim Taiclet, during an earnings call with analysts, noted that these payments, expected by June 30, might continue to be delayed into the third quarter.
Analysts have raised concerns about the persistent risks associated with supply chain disruptions, anticipating a slow resolution to these challenges.
Lockheed Martin’s earnings are considered a key indicator for the defense industry, and rivals Northrop Grumman (NYSE:NOC) and General Dynamics (NYSE:GD) are scheduled to report quarterly results later in the week.
Lockheed’s 2024 profit is forecasted to be in the range of $25.65 to $26.35 per share, falling short of the average analyst expectation of $26.62, according to LSEG data. The company reported a 2.4% decline in fourth-quarter net income to $1.87 billion, although on a per-share basis, profit increased from $7.40 to $7.58.
In the fourth quarter, the company’s largest aeronautics business experienced a 0.3% decline in sales, while overall sales fell by 0.7% to $18.87 billion. The Missiles and Fire Control unit, responsible for products like the High Mobility Artillery Rocket System (HIMARS), saw a 3.5% drop in revenue to $3.17 billion.
Lockheed Martin’s Chief Financial Officer, Jay Malave, indicated that capital expenditures would remain elevated in 2024. The company plans to invest in building production for weapons systems in high demand, including the Guided Multiple Launch Rocket System (GMLRS), HIMARS, Joint Air-to-Surface Standoff Missile (JASM), and Long Range Anti-Ship Missile LRASM. Lockheed anticipates 2024 sales in the range of $68.50 billion to $70 billion, exceeding analysts’ average expectations of $68.66 billion.
Featured Image: Unsplash
Author Faith Yakubu 
