Lockheed Martin Falls on Disappointing Cash Flow Outlook

Lockheed Martin Corp. (LMT)  fell Tuesday, April 24, after the defense contractor didn't raise its free cash flow forecast even as the Trump administration spends more on defense.

Lockheed's Chief Financial Officer Bruce Tanner said during the conference call that pension contributions could case "negative cash from operations in the second quarter." The outlook for cash from operations was the only financial category that Lockheed did not revise higher. 

Lockheed stock dropped 6.25% to $336.20 after opening up 0.7%.

The Bethesda, Md.-based company raised its full-year forecast after topping analysts' first-quarter estimates.

For the full year, Lockheed now expects 2018 revenue in the range of $50.35 billion to $51.85 billion, compared to its previous guidance of $50 billion to $51.5 billion. Earnings are now anticipated to be between $15.80 and $16.10 a share, up from $15.20 and $15.50.

"While the target for at least $17 billion of cumulative FCF from 2018-2020 was not changed, management noted that the fiscal year 2018 omnibus budget included $7 billion more in funding for Lockheed Martin's programs than the budget request, representing potential long-term upside," said RBC Capital Markets analyst Matthew McConnell.

Lockheed reported net earnings of $4.02 a share, which beat analysts' estimates of $3.39, according to FactSet. Revenue of $11.64 billion for the quarter also topped forecasts that called for $11.24 billion.

Revenue at Lockheed's aeronautics division rose 7% year over year, largely attributed to net sales of $185 million for the F-35 program and about $80 million for other combat aircraft modernization programs.

But the Pentagon and Lockheed are sorting out an issue related to the F-35 program, which is central to the company's revenue. Lockheed confirmed earlier this month that the Pentagon had halted deliveries of the jet over a contractual issue. Chief Executive Officer Marillyn Hewson said during the conference call that "it's just a temporary suspension ... until we reach agreement on a contractual issue."

-- This story has been updated to include commentary from the conference call. 

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