Lockheed Martin Stock Dips After Report US Is Buying Fewer F-35s Jets

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The US military has ordered some 2,400 F-35 jets. Above, F-35C Lightning II planes based in California fly in formation. Shannon E. Renfroe/ Navy Public Affairs Support Element West / Lockheed Martin

Shares of the defense giant Lockheed Martin are down in morning trading Wednesday after a Bloomberg report that the US government will buy fewer F-35 jet fighters in its fiscal year 2023. The size of the cut looks small, but investors are selling anyway, perhaps due to other factors.

Lockheed (ticker: LMT) shares are down 4.1% in early Wednesday trading. The S&P 500 and Dow Jones Industrial Average are up 1.4% and 1.3%, respectively.

About 33 planes seem to be responsible for the majority of the daily drop. That is the number of planes that are being cut from the US defense budget for 2023, according to Bloomberg. Lockheed had no immediate comment.

Overall, the US military has ordered some 2,400 F-35 jets. The armed forces of other countries have ordered another 900. Lockheed had delivered about 750 as of the end of 2021.

It looks as if demand for F-35 jets should continue far into the future, but the budget cuts could still affect 2022 financial results. (The government’s fiscal 2023 starts in October 2022.)

Currently, Lockheed has told investors to expect about $66 billion in sales for 2022, along with about $6 billion in free cash flow and $26.70 in per-share earnings. Wall Street projections now line up with that forecast. Analysts, for instance, project $66.1 billion in 2022 sales and $26.82 in EPS.

For 2021, Lockheed reported $67 billion in sales and $22.76 in EPS.

The Wednesday dip eats away at some of the stock’s recent strong returns—a sign that some basic profit-taking could also be playing a role in Wednesday trading. Coming into the day, Lockheed stock was up about 26% year to date.

The Russia-Ukraine war has boosted all defense stocks. Northrop Grumman (NOC) shares, for instance, are up about 14% year to date.

Investors appear to also be reacting to positive developments regarding the European war. Northrop shares were down Wednesday as well, by about 1.8%.

Ukraine President Volodymyr Zelensky said recently that Russian demands are getting “more realistic.” What’s more, the two sides spoke Tuesday and were due to speak again Wednesday.

That is good news, even if it results in a little pressure for the defense sector.

Lockheed and Northrop shares are trading for about 16.5 times and just under 18 times estimated 2022 earnings, respectively. That is a discount to the S&P 500 multiple of about 19 times. The small discount reflects some wariness among investors about US military spending given large budget deficits.

Write to Al Root at [email protected]

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