Lockheed Martin posts strong Q1 but trims 2020 sales outlook

Harry Lye 21 April 2020 (Last Updated April 21st, 2020 16:34)

Lockheed Martin has posted positive results in Q1 of 2020 despite the ongoing Covid-19 coronavirus pandemic that is threatening business across the world.

Lockheed Martin posts strong Q1 but trims 2020 sales outlook
Image: Lockheed Martin

The company reported an net earnings of $1.7bn nearly unchanged when compared to Q1 of 2019, and delivered slightly fewer aircraft than in 2019. Lockheed also posted a slight increase in earnings on the same period with Q1 2020 net sales reaching $15.7bn.

In another positive sign, the company reported it had generated $2.3bn in cash from operations last quarter.

The F-35 manufacture updated its 2020 outlook, noting that the ultimate financial effect of Covid-19 remained uncertain, however, Lockheed maintained its profit estimates, net sales forecasts saw a slight decrease.

In a press release, Lockheed Martin said: “The outbreak did not have a material impact on the corporation’s operating results or business in the first quarter of 2020. However, the corporation is beginning to experience some issues in each of its business areas related to COVID-19, primarily in access to some locations and delays of supplier deliveries.

“The corporation is updating its 2020 guidance for net sales to reflect these impacts, as production and supply chain activities have recently slowed in the Aeronautics business area. However, the ultimate impact of COVID-19 on the corporation’s 2020 outlook for sales, segment operating profit, earnings and cash flows from operations remains uncertain.”

During the quarter the company delivered 23 F-35 fighter jets, production of the jet was called into question in past months after plants that undertake final assembly of the fighter in Japan and Italy were forced to close, however, this did not have a large impact on production.

Across its four business areas Aeronautics, Missiles and Fire Control, Rotary and Mission Systems and Space, Lockheed reported an order backlog worth $144bn.

Lockheed Martin chairman president and CEO Marillyn Hewson said: “As we confront the challenges introduced by the global pandemic, our corporation remains focused on providing vital national security solutions for our customers while maintaining a safe and healthy environment for our employees.

“I’m so proud of the work the dedicated men and women of Lockheed Martin are doing as part of our strong portfolio to deliver critical products and services for our customers and long-term value for our shareholders.”

Despite the positive results so far, defence analysts told Army Technology that the full impact of Covid-19 on Lockheed Martin’s finances would not be evident until later in the year.

Globaldata ADS analyst Anthony Endresen said: “While the first-quarter earnings are better than many might have anticipated, there is still the reality that as a Prime, Lockheed Martin will not know the impact of COVID-19 on earnings until later in the year.

“The nature and duration of contracts and delivery mean that the first quarter is too early to tell, though one should expect the COVID-19 crisis economic fallout to translate to leaner times across all sectors.”

Endresen added that defence as an industry was well placed to respond to the crisis. A number of governments have loosened the taps on defence spending in order to support their military supplier bases through the crisis. In one notable example, the USAF released funding withheld from Boeing for faults with the KC-46 aerial refueller.

Endresen added: “Defence is certainly better insulated than most sectors in this regard. The real immediate impact is more likely to be felt through the supply chain, where cash flow and liquidity are the most urgent concerns.”

Of its business areas, Aeronautic accounted for the highest share of the companies’ earnings, generating $6.369bn in net sales, and accounting for $672m in profit in the quarter. Elsewhere Missiles and Fire Control earnt the company $2.619bn in sales, Rotary and Mission Systems $3.746bn and Space $2.917bn.