(Jan 30): Lockheed Martin Corp said it reached a deal with the Pentagon to increase THAAD interceptor production, as the company issued an upbeat guidance for 2026 amid record deliveries of its F-35 fighter and growing missile sales.
The company’s stock soared as much as 8.1% to US$645.67 during trading in New York, the highest on record in intraday trading, according to data compiled by Bloomberg. Lockheed has risen 32% so far this year as investors look to capitalise on a surging defence budget in the US.
The framework agreement with the Defense Department would quadruple production of THAAD missile interceptors from 96 to 400 a year. The announcement did not disclose the terms of the deal, but the company said it planned a multibillion-dollar investment over three years to expand production, while building and upgrading more than 20 facilities.
“This is a customer partnering with us to find the best, most efficient way to rapidly scale capability,” Lockheed chief executive officer Jim Taiclet said during a Tuesday earnings call. “I think we’re going to see some partnership with cash flow terms to make sure that we’re well supported as we make these investments.”
In an earnings statement just after the THAAD agreement was announced, the Bethesda, Maryland-based company reported a 9.1% increase in sales to US$20.32 billion in the fourth quarter, beating analyst estimates. Adjusted profit was US$5.80 a share, below analyst expectations of US$5.86, according to data compiled by Bloomberg.
For this year, Lockheed predicted earnings of US$29.35 to US$30.25 a share, compared with estimates of US$29.09. Net sales will reach US$77.5 billion to US$80.00 billion, in line with consensus.
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Investors are closely watching the world’s largest defence contractor for clues on its spending plans after President Donald Trump said the defence budget for fiscal 2027 should surge to US$1.5 trillion. Lockheed and the Pentagon recently hammered out a framework to boost production of its PAC-3 missiles that could be applied to other missile systems, a crucial area of growth.
Trump and Defense Secretary Pete Hegseth have criticised stock buybacks and dividends by defence primes, calling on the companies to step up spending on infrastructure and research and development. Lockheed’s board of directors increased the total authorisation for share repurchases to US$9.1 billion in October.
Taiclet wouldn’t say whether Lockheed will return the equivalent of 100% of its free cash flow to investors through buybacks and dividends, it’s previous capital allocation strategy. But he emphasised the investments in new technology, predicting the company’s missile division would see double-digit annual revenue growth for the rest of the decade.
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“Like its peers, Lockheed basically has no choice but to invest if it is to participate in the growth trajectory that should be ahead, as the US Government is not going to fund it,” analyst Robert Stallard of Vertical Research Partners, wrote in a note to clients. “This corporate co-operation on capex could ease the Government ire about defence company share buybacks, and executive pay.”
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