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The defense sector has continued to operate through coronavirus-driven shelter-in-place restrictions, deemed an essential sector, with the Pentagon disclosing that only around 1% of the broader supply base is shuttered.
Big contractors like Lockheed Martin have provided additional payments to support smaller companies, and with the Pentagon accelerating some of its own funding and contract awards, companies have also pivoted some production capacity to produce medical supplies.
|LMT||LOCKHEED MARTIN CORP.||371.67||-0.93||-0.25%|
The lack of business interruption helped Lockheed Martin, the world's largest defense company by sales, maintain existing profit guidance for 2020, with only a small trim to its revenue outlook.
Lockheed Martin's footprint across air, space, sea and land systems makes it a proxy for Pentagon spending, with U.S. government outlays rising 6% in the first quarter from a year earlier, including a 31% jump in March.
The company reported profit of $1.7 billion in the March quarter, flat with a year earlier. Per-share earnings rose to $6.08 from $5.99, above the $5.80 consensus among analysts polled by FactSet. Sales climbed to $15.7 billion from $14.3 billion a year earlier.
Lockheed Martin expects sales to rise to as high as $64 billion this year, trimming just $250 million from the top end of its guidance because of pandemic-related disruption.
Profit is still forecast at between $23.65 and $23.95 a share, and free cash-flow guidance was left unchanged.
The Pentagon plans to seek billions of dollars more to supplement its budget to counter disruption to production, noting some impact in areas such as shipbuilding and aerospace that could lead to delays of around three months on some programs.
Defense-sector shares have recovered most of their losses from the broader market collapse in late February and March.
Lockheed Martin was up almost 2% in preopen trade.
The company last month appointed telecom-industry veteran James Taiclet to succeed Marillyn Hewson as Chief Executive in June. Mr. Taiclet has been CEO of American Tower Corp. since 2004.
He joined Lockheed Martin's board two years ago, having worked for a variety of other big aerospace companies. He formerly ran the aerospace services unit at Honeywell International Inc., and was a senior executive at the Pratt & Whitney unit of Raytheon Technologies Corp., which makes the engines for the F-35 combat jet.
Ms. Hewson will stay on as executive chairman.
Defense companies have wrestled with the impact of the coronavirus, especially on classified activities accounting for 20% or more of their business.
Lockheed Martin and peers have halted all but mission-critical travel and increased telecommuting, but classified work has to be conducted in-person at secure facilities. The Bethesda, Md., defense contractor said it has staggered shifts at its secure facilities and introduced flexible working practices to limit interaction.