Morning Briefing - April 24, 2019
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April 24, 2019

Lockheed Martin Soars in First Quarter of 2019

By ExchangeMonitor

Lockheed Martin blew open the door in its first-quarter financials with a strong showing across all of its operating segments and the company increased its guidance for earnings, sales, and cash this year.

Net income jumped a whopping 42 percent to $1.7 billion, $5.99 earnings per share (EPS), from $1.2 billion ($4.02 EPS) a year ago, smashing consensus estimates of $4.34 EPS. Strong gains in operating income at the segment level combined with a pension tailwind, lower taxes, and a deferred gain from the sale of properties in 2015 drove the earnings result.

Sales increased 23 percent to $14.3 billion from $11.6 billion a year ago, with all four of the company’s segments up double digits. The company also benefited from having an extra week in the accounting period.

At the operating level, all four segments boosted their profit by at least 22 percent, with Missiles and Fire Control (MFC) up the highest at 60 percent and Rotary and Mission Systems holding the low rung.

The strong first-quarter results combined with expectations led Lockheed Martin to increases its financial guidance. Sales are now forecast to be between $56.8 billion and $58.3 billion, up a billion from the prior outlook, and earnings are projected to be between $20.05 and $20.35 EPS, 90 cents per share higher than guidance given in January. The top and bottom-line guidance is higher across the company’s segments than the prior outlook.

Lockheed Martin and Raytheon are maturing competing designs for the Pentagon’s next nuclear-tipped, air-launched cruise missile, the Long-Range Standoff Weapon (LRSO), under four-and-a-half-year contracts awarded in 2017 and worth about $900 million each. The Air Force has said it plans to buy roughly 1,000 LRSO missiles, which it plans to start deploying in the late 2020s.

LRSO will carry the W80-4 warhead provided by the Department of Energy’s National Nuclear Security Administration. To keep the W80-4 life-extension program on pace with LRSO missile development, Congress sharply increased funding for DOE’s warhead refurbishment in fiscal 2019. The department is seeking another big increase for 2020, to nearly $900 million: more than 35% above the 2019 appropriation.