Lockheed Martin profit up but forecasts lower cash flow in 2020; shares slip

(Reuters) – Lockheed Martin Corp (LMT.N) raised its estimate for 2019 earnings on Tuesday as quarterly profit climbed 9.2% amid improved sales of its F-35 fighter jets, but shares fell in premarket trading after it forecast lower cash flow next year.

FILE PHOTO: Lockheed Martin’s logo is seen in Tokyo, Japan, October 12, 2016. REUTERS/Kim Kyung-Hoon/File Photo

The company also said the “preliminary outlook for 2020 assumes there is no impact from U.S. Government actions related to Turkey.” The U.S. and Turkey are embroiled in a dispute over a Russian missile defense system and its impact on Turkish defense purchases.

Lockheed estimated 2020 cash flow of $7.2 billion, lower than its 2019 year-end estimate of $7.6 billion, which disappointed investors and sent the stock down about 2.9% in premarket trading.

Lockheed raised its profit estimate for 2019 by 1.9% to $21.55 per share from $21.15, the high point of a previous guidance, amid an improved performance in its aeronautics business.

The Bethesda, Maryland-based company said 2020 sales would increase 5% to $62 billion from the current year-end 2019 estimate of $59.1 billion.

Business unit profit margins in 2020 were estimated to be between a range of 10.5% and 10.8%, lower than the 11.2% margin so far this year.

Turkey had agreed to buy 100 stealthy F-35 jets, Lockheed’s biggest program, but the Pentagon removed the NATO ally from the program here and the jet’s supply chain.

To be sure, other countries have expressed an interest in buying the F-35 and in September, the U.S. State Department approved a proposed sale of 32 F-35 fighter jets worth as much as $6.5 billion to Poland.

The Pentagon has said the U.S. is spending between $500 million and $600 million in non-recurring engineering in order to shift the supply chain away from Turkey.

There were some operating segment wins for Lockheed during the quarter.

Lockheed was awarded a NASA contract worth up to $4.6 billion to build Orion astronaut capsules to help NASA build a sustainable presence on the moon. Though sales at the space unit were up 5%, the 11.5% profit margin at the space unit was unchanged from last year.

Lockheed’s net income rose to $1.61 billion, or $5.66 per share, in the third quarter ended Sept. 29, from $1.47 billion, or $5.14 per share, a year earlier.

Net sales rose to $15.17 billion from $14.32 billion.

The company delivered 28 F-35 combat jets in the quarter, compared with 20 a year earlier.

During the second quarter, Lockheed delivered 29 F-35s. So far this year, the company has delivered 83 of the jets, out of a total expected for the year of 131.

Lockheed’s income tax rate was 9.7% in the third quarter, compared to 6.5% in the third quarter of 2018.

Reporting by Mike Stone in Washington and Dominic Roshan K.L. in Bengaluru; Editing by Bernadette Baum

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