Lockheed Martin’s earnings impressed, but its sales were disappointing.
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Lockheed Martin
‘s third-quarter sales were worse than Wall Street expected—but the real bad news is that the company expects revenue to fall short of its full-year goals and to decline further in 2022.
The downbeat view on sales clouded out the company’s earnings, which beat expectations. Lockheed Martin stock dropped more than 8% in U.S. premarket trading Tuesday. The shares have climbed 9.2% in 2021.
The aerospace and defense giant reported third-quarter sales of $16 billion, down from $16.5 billion in the same period in 2020 and below the $17.1 billion expected by Wall Street, according to FactSet data. The group also slashed its full-year sales outlook to $67 billion, down from a previously-guided range of $67.3 billion to $68.7 billion.
It will get worse in 2022. Lockheed Martin expects net sales to decline next year to $66 billion.
“We have recently undertaken a reassessment of our five-year business plan given recent external and programmatic events,” said James Taiclet, the company’s president, CEO, and chair, in a statement.
“Our conclusions, which are reflected in our updated 2021 guidance and subsequent trend information, reflect continuing strong cash flow generation, but a slight reduction in revenue in 2022 and roughly flat to low-single-digit growth rates in both revenue and segment operating profit over the next few years, with increasing growth opportunities in the years that follow,” Taiclet said.
The head of the leading U.S. defense contractor said the company was adjusting its capital allocation strategy as a result of the expected changes. The group will increase reinvestment in capital projects and independent research as well as reward shareholders with dividend growth and a “meaningful” increase to the scale and rate of share buybacks.
More broadly, Lockheed Martin’s net earnings were $614 million, down from $1.8 billion a year ago but ahead of the $505 million analysts had estimated. That represents diluted earnings per share (EPS) of $2.21, a decline from $6.25 in the comparable period in 2020. The earnings reflect a noncash pension settlement charge of $1.7 billion, or $4.72 per share after tax.
Full-year EPS is expected to be around $22.45, above the previously-guided range of $21.95 to $22.25.
Lockheed Martin’s results echo those from defense peer Raytheon Technologies , (RTX) which also reported Tuesday. Raytheon’s sales similarly missed expectations even as earnings beat estimates, and its full-year sales forecast of $64.5 billion sat at the bottom of the $64.4 billion to $65.4 billion range the company previously guided.
