Lockheed Benefits From Boosted F35 Production

Lockheed Martin revised its financial outlook for fiscal year 2023 as the aerospace and defense contractor reported an increase in second-quarter net sales and a record backlog, benefiting from a higher volume of F-35 production contracts and a rise in orders from its space program.

The Bethesda, Maryland-based company revised its financial outlook for full fiscal 2023 to between $66.25 billion and $66.75 billion and diluted earnings in the range of $27 to $27.20 per share. That compared to its April forecast of between $65 billion and $66 billion and diluted earnings of $26.6 to $26.9 per share.

The company also reported an 8% increase in second-quarter net sales to $16.7 billion from the year-ago period and net earnings of $1.7 billion or $6.63 per share. The company said it returned $1.5 billion to shareholders in the form of cash dividends and share repurchases.

"Given the strength of our year-to-date results and ongoing demand for our signature programs and advanced technologies, we are raising our full year sales and earnings per share outlooks for 2023,” Jim Taiclet, chairman, president and CEO of Lockheed, said. “We are confident in our return to growth and ability to reward our shareholders over the long run with reliable free cash flow per share expansion and cash deployment.”

The company’s backlog reached a record level of $158 billion as of June 25, up $8 billion from the year-end. Aeronautics represented $58.1 billion and missiles and fire control $34 billion of the total, the company said.

“This highest-ever backlog gives us visibility into multi-year sales of our key programs and enables our suppliers to be better positioned to meet growing demand,” Taiclet said during the second quarter results conference call.

F-35 Program

Aeronautics’ sales increased 17% year over year to $6.88 billion, primarily driven by higher volume of production contracts for F-35 jets as well as higher volume of sustainment contracts for C-130 program.

Global interest in the F-35 has soared because of Russia’s invasion of Ukraine. The US in June approved the sale of as many as 24 of the planes to the Czech Republic, and South Korea has indicated it wants more of the jets as well, Bloomberg reported.

“On the F-35 program, we continue to see strengthening customer demand, both domestically and internationally,” Taiclet said during the conference call. Israel has formally decided to add 25 more F-35s, expanding their fleet by 50%, he said.

Lockheed delivered 50 F-35s in the first half of 2023, all of which were delivered in the Technology Refresh 2 or TR-2 configuration. The company should deliver 100 to 120 F-35 aircraft in 2023, Taiclet said.

“There is no change to our longer-term delivery outlook of 156 aircraft in 2025 in the foreseeable future, he said. The supply chain and production system continues to execute at a rate to support these future-year delivery targets.”

Space Sales

Its space sales increased 12% year over year to $3.17 billion due to higher sales from strategic and missile defense programs, national security space programs and commercial civil space programs, the company said. Missiles and fires control business’ revenue in the second quarter was $2.76 billion, compared to $2.75 billion in the prior-year period.

The rotary and mission systems segment dropped 3% in sales due to lower Black Hawk production volume.

Cash from operations in the second quarter of 2023 was $1.1 billion and capital expenditures were $329 million, resulting in free cash flow of $771 million. The decrease in operating and free cash flows in the second quarter of 2023 compared to the same period in 2022 was primarily due to the timing of federal tax payments, the company said.

“Along the way, we will continue developing and investing in our 21st Century Security vision to strengthen the resilience and responsiveness of the US defense production system, elevate deterrence through the acceleration of digital technologies into critical missions with our commercial industry partners,” Taiclet said adding that Lockheed will “deepen our industrial relationships with allies and partner nations for production and sustainment operations."