by Jim Morris, Warrior Vice President, News
Budget pressures in the US are forcing the world’s largest defense contractor to act more efficiently and expand its integration of emerging commercial technologies.
Two of Lockheed Martin’s C-suite executives explained where the maker of the F-35 stands Thursday at Bernstein’s 40th annual Strategic Decisions Conference.
“It’s a bit ironic where we are in a situation where we’ve got threats increasing at a rate we haven’t seen in decades. We’ve got technology increasing at a furious pace and yet in terms of real dollars, there’s less resource,” said Lockheed chief operating officer Frank St. John.
“That puts the emphasis on us as prime contractors for the US government to be more agile and more efficient and be able to deliver them capability within the resource constraints. But if you look at the specifics of the budget …there are some good things for Lockheed Martin in there.”
In March, President Biden submitted a budget request for the coming fiscal year that includes $850 billion for defense. That represents a 4.1 percent increase from FY 2023. But when you add in inflation, that increase turns into negative growth.
It’s not that the president could do much about that. Two years ago, Biden reached an agreement with the then-Speaker of the House, Kevin McCarthy, that capped defense spending. According to Brookings Institution, that $850 billion budget actually turns into $895 billion when you throw in things such as the National Nuclear Security Administration’s nuclear weapons activities and some other items.
Lockheed Martin, which includes weapons systems such as fighter jets, missiles and helicopters in its portfolio, still expects to see healthy growth despite budget issues.
“Let’s start with 2024. We had plus-ups, substantial plus-ups. F-35s were increased, combat helicopters were increased. Even when you talk about the context of a three percent budget increase in 2024, our backlog increased by 2x of that growth rate,” said Lockheed CFO Jay Malave.
“You always have to worry about cancellations and things like that. But based on what we see today, we’re trending towards higher growth than we’d originally anticipated for the year and still having our backlog grow. I think that’s a testament to the portfolio we have.”
St. John said Lockheed is off to a good start this year. Both revenue and earnings in the first quarter beat Wall Street estimates.
The company has been awarded the contract to build the Next Generation Interceptor, a weapons system designed to protect the US against intercontinental ballistic missile attacks. And this spring, Lockheed and the US Navy achieved a first – they test-fired a Patriot missile from the deck of a Navy warship.
That widens the capabilities for the Patriot, which has primarily been ground-based.
St. John says it’s part of Lockheed’s 21st century security strategy, “really bringing commercial technology and the billions o dollars that have been invested in things like edge computing networking, artificial intelligence and applying that to military problems for our customers.”
