Lockheed Investor Focus Is on Managing Relations With White House -- Earnings Preview
24 January 2017 - 6:28AM
Dow Jones News
By Doug Cameron
Lockheed Martin Corp. and its F-35 combat jet program have
become the focus of President Donald Trump's criticism of defense
costs, and were already in the crosshairs after the Pentagon
imposed a deal on the company for the last batch of jets. The stock
has retreated from a postelection high that reflected expectations
of higher military spending. The focus for investors as the company
prepares to report fourth-quarter results before the market opens
Tuesday is clearly on how Marillyn Hewson, now in her fourth year
as chief executive, manages relations with the White House. Here's
what you need to know:
EARNINGS FORECAST: Net profit of $3.05 a share for the quarter
is the consensus among analysts polled by Thomson Reuters, and
compares with the $2.87 a share reported for the same period last
year. Forecast profit of $906 million compares with $890 billion
last year.
REVENUE FORECAST: Fourth-quarter revenue is forecast at $13
billion compared with $12.92 billion a year ago. The period is
generally the best for international sales, so additional export
orders could boost its book-to-bill close to or above one for the
year.
WHAT TO WATCH:
THE F-35: Existing plans call for the price of the most common
F-35 model to drop as low as $75 million in today's prices from
$102 million right now. Any acceleration of the plan -- including
additional investment from Lockheed and its partners -- has to
balance the gains from satisfying the White House with the
potential negative of trying to boost margins on the 3,000 jets
that are still, in theory, to be delivered.
OUTLOOK: It will take two years or more for the new
administration's defense budgets to filter through to contractors,
so the pace of F-35 purchases, stock buybacks and overseas sales in
2017 are the main drivers for the $12.81 per-share consensus for
profits in 2017 alongside maintaining the sales growth forecast of
7%.
PENSIONS: A three-year holiday is coming to an end but rising
interest rates should provide a tailwind after the caution Lockheed
exhibited in mid-2016 about the cost of future payments.
Write to Doug Cameron at doug.cameron@wsj.com
(END) Dow Jones Newswires
January 23, 2017 14:13 ET (19:13 GMT)
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