Trump’s dissatisfaction is quite concerning as Lockheed’s F-35 represents key sales generator for the company
Lockheed Martin Corporation (NYSE:LMT) CEO Marillyn Hewson announced on Friday, Wednesday 23, that she has committed to President-elect Donald Trump to work on driving down costs of F-35 – company’s fighter jet. The move followed Trump’s recent tweet regarding F-35 costs.
Trump had tweet on late Thursday that Boeing Co’s (NYSE:BA) older aircraft provides a cheaper alternative to Lockheed’s F-35. He stated, “Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet.” According to Reuters, CEO Hewson talked to Trump on Friday afternoon, assuring him that she heard his message loud and clear regarding reducing cost of F-35. mn
Ms. Hewson also stated that she gave her personal commitment to the new president to drive down costs aggressively. Consequently, Lockheed Martin shares traded in red, closing down about 1.3% on Friday, almost hitting their lowest levels since the recent US elections. Reuters report also indicated that LMT shares were the biggest drag on defense-related stocks basket.
Moreover, Reuters suggested that it was impossible to dissect what Donald Trump meant by his tweet. This is because Boeing’s F-18 lacks stealth capabilities possessed by F-35, which are vital to counter advanced defenses of near peer states, such as China or Russia. The report cited a US official who questioned Mr. President regarding his plans to confront China while lacking necessary aircraft capabilities. Additionally, most of the defense analysts consider the two jets incomparable. Nonetheless, Trump’s dissatisfaction is concerning because F-35 is a critical sales generator for Lockheed.
Lockheed’s consensus price target stands at $276.76, indicating 10.9% upside potential over last close. Furthermore, of 21 analysts covering the stock at Wall Street, 9 rated it as Buy, 1suggested Overweight, and 11 recommended holding the shares for longer term.