Defense company Lockheed Martin (NYSE: LMT) reported its first-quarter earnings Tuesday, announcing that ongoing COVID constraints, supply-chain shortages, and geopolitical events caused sales across its businesses to fall short of estimates.
The company reported that net earnings fell to $1.73 billion from $1.84 billion in the first quarter of 2021. Q1 sales of $14.96 billion were lower than the $15.58 billion analysts expected.
On a company earnings call, Lockheed chairman, president, and CEO James Taiclet said, “Global events this quarter marked a dramatic change in the geopolitical environment and demonstrated the tremendous importance of an effective deterrent to aggression by major nation-states, and mutual defense among the United States and its allies.”
Overall, year-over-year earnings decreased by 2 percent, and revenue fell 8 percent. The company also generated $1.1 billion in free cash flow, down from the $1.5 billion it did in the same quarter last year.
F-35 Program Sees Strong Sales
All was not bad. In the aeronautics division, revenue grew following significant orders for its F-35 fighter jet. The company delivered 26 of them in Q1 compared to 17 in the first quarter of last year. Even with this, net sales for the F-35 program decreased by more $65 million, which the company attributed “due to lower net favorable profit adjustments and volume on production contracts.”
However, the company remains optimistic for the rest of 2022. Taiclet believes that the Russia-Ukraine conflict will encourage allied nations to improve their military spending.
To that end, the company reported that Germany recently announced its intent to procure 35 aircraft worth $107 billion to improve its defense program. During the quarter, Lockheed announced its $1 billion project with Saudi Arabia to strengthen that country’s military capabilities. Elsewhere, the Canadian government is finalizing a plan to purchase 88 F-35 fighters—a $15 billion deal—for the Royal Canadian Air Force.
“Canada is one of the original eight partner countries on the F-35 program. We’re very pleased to have the opportunity to provide this unrivaled plane to strengthen Canada’s national defense,” Taiclet shared on the call.
Despite the slow start to the year, Taiclet said the company’s 2022 full-year outlook remains intact. Chief financial officer Jay Malave noted the first-quarter sales that were $250 million below their expectations equated to less than a single day of volume. The company fully expected to recoup its losses through the remainder of 2022.
Following the call, Lockheed’s price was down 1 percent to $460.
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