Defense Giant Lockheed Martin Faces Profit Headwinds Amid Global Tensions
As global tensions escalate, Lockheed Martin, the world’s largest defense contractor, is grappling with the consequences of delayed tech upgrades on its F-35 fighter jet program. On Tuesday, the company forecast a 2025 profit that fell short of Wall Street expectations, sending its shares tumbling by 4% in premarket trading.
Rising Demand, Slowing Recovery
Despite a surge in demand for weaponry due to the Russia-Ukraine war and Middle East conflicts, U.S. defense contractors like Lockheed Martin are struggling to keep up. Pandemic-related supply chain issues are still affecting production, leading to a cautious outlook for the year.
Profit Projections Miss the Mark
Lockheed Martin expects to post a profit per share of $27 to $27.30 in 2025, below analysts’ average estimate of $27.92 per share. This marks a significant decline from the previous year, with net income plummeting 71% to $527 million, or $2.22 per share.
Classified Program Losses Weigh Heavily
The company booked $1.29 billion in losses associated with classified programs at its aeronautics and missiles and fire control business units. This significant hit to its bottom line has raised concerns among investors.
Shifting Priorities in Washington
While the Trump administration is expected to increase defense spending, the formation of the Department of Government Efficiency, led by Elon Musk, has cast a shadow over the industry. Musk has criticized legacy defense programs, including Lockheed Martin’s F-35, and advocated for mass production of cheaper AI-powered drones, missiles, and uncrewed submarines.
F-35 Program Delays Take a Toll
The F-35 program, which accounts for approximately 30% of Lockheed Martin’s revenue, has been plagued by delays in rolling out a technology upgrade. This has resulted in a 40% drop in operating profit for the company’s aeronautics business in the fourth quarter.
Total Sales Marginally Lower
Lockheed Martin’s total sales of $18.62 billion in the quarter were only slightly lower than the previous year. As the company navigates these challenges, investors will be closely watching its progress in the coming year.
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