Disappointing Cash Flow Outlook Lowers Lockheed Shares

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Lockheed Martin Building

Lockheed Martin Corporation [NYSE: LMT], on Tuesday, fell by 6.1 per cent to USD$336.49 as the weapons supplier failed to raise cash flow projections for 2018. A little puzzling and disappointing for investors as the company is the number one weapons supplier to the U.S. government who recently spent far more on defense than they did in the previous year.

Lockheed recorded modest profits in its first quarter review and even surpassed estimates from analysts. In light of this, Lockheed raised its 2018 forecast. Additionally, the company experienced increased sales of the F-35 combat jets. Lockheed, however, blames pension contribution for which it stated caused “negative cash from operations in the second quarter.”

The annual cash flow forecast was the only aspect of the company’s financials which was not revised higher. Lockheed is however optimistic that the outlook for cash flow may change as “it is still early in the year and cash is trickier to predict.”

Controversy is seemingly affecting the company’s ambition to raise its financial outlook for the coming quarter as news surfaced of the US Department of Defense having stopped the delivery of the F-35 jet disputing a production error and the responsible party. The F-35 jet is responsible for about a quarter of Lockheed sales and without it the company’s growth potential may be significantly impacted.

In 2018, Lockheed projects that the company will make revenue between USD$50.35 billion to USD$51.85 billion compared to its previous forecast of USD$50 billion to USD$51.5 billion. In the first quarter of 2018, which ended March 25, Lockheed made net income of USD$11.16 billion compared to USD$789 million for the same period in the previous year. Net sales increased by 4 per cent from USD$11.21 billion to USD$11.64 billion.


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