President Biden is set to request a smaller number of F-35 fighter jets in the upcoming Federal budget, a move that will impact Lockheed Martin, the manufacturer of the aircraft.
Budget Requests and Congressional Timeline
Normally, the President presents budget requests at the beginning of the year, while Congress works on spending leading up to the new fiscal year starting on October 1st.
Decrease in F-35 Orders
For fiscal year 2025, it is anticipated that Biden will order around 70 F-35s, a decrease from the expected 83. In 2023, Lockheed delivered 98 F-35 jets, down from 141 the previous year. It is important to note that Lockheed also sells F-35s to international customers.
Impact on Lockheed Martin
As news of the reduced orders broke, Lockheed Martin’s stock experienced a decline of 2.4% in Wednesday’s trading, falling to $416.39. On the other hand, the S&P 500 and Nasdaq Composite saw gains of 0.4% and 0.6%, respectively.
The decision by President Biden aligns with Lockheed’s expectations for 2024 sales to be between $68.5 billion and $70 billion. The reduction in F-35 orders is estimated to make up approximately 2% of the sales guidance, which amounts to about $1.5 billion. However, it is worth noting that some of this decline was likely already factored into the company’s guidance, as Lockheed is aware of budgetary pressures from the Defense Department.
Lockheed Martin’s Performance and Future Growth
Despite lower F-35 sales, Lockheed reported a 2% increase in aeronautics sales, reaching $27.5 billion in 2023 compared to the previous year. Overall, the company generated $67.5 billion in sales in 2023. Analysts are expected to update their projections in the days to come, as the market absorbs this news.
It will take some time for Wall Street and investors to fully evaluate the impact of these developments. However, it is worth noting that Lockheed’s stock has already experienced a 14% decline over the past 12 months.