LMT Lockheed Martin Corp

By Doug Cameron 

Lockheed Martin Corp. and its F-35 combat jet program have become the focus of President Donald Trump's criticism of defense costs, and were already in the crosshairs after the Pentagon imposed a deal on the company for the last batch of jets. The stock has retreated from a postelection high that reflected expectations of higher military spending. The focus for investors as the company prepares to report fourth-quarter results before the market opens Tuesday is clearly on how Marillyn Hewson, now in her fourth year as chief executive, manages relations with the White House. Here's what you need to know:

EARNINGS FORECAST: Net profit of $3.05 a share for the quarter is the consensus among analysts polled by Thomson Reuters, and compares with the $2.87 a share reported for the same period last year. Forecast profit of $906 million compares with $890 billion last year.

REVENUE FORECAST: Fourth-quarter revenue is forecast at $13 billion compared with $12.92 billion a year ago. The period is generally the best for international sales, so additional export orders could boost its book-to-bill close to or above one for the year.

WHAT TO WATCH:

THE F-35: Existing plans call for the price of the most common F-35 model to drop as low as $75 million in today's prices from $102 million right now. Any acceleration of the plan -- including additional investment from Lockheed and its partners -- has to balance the gains from satisfying the White House with the potential negative of trying to boost margins on the 3,000 jets that are still, in theory, to be delivered.

OUTLOOK: It will take two years or more for the new administration's defense budgets to filter through to contractors, so the pace of F-35 purchases, stock buybacks and overseas sales in 2017 are the main drivers for the $12.81 per-share consensus for profits in 2017 alongside maintaining the sales growth forecast of 7%.

PENSIONS: A three-year holiday is coming to an end but rising interest rates should provide a tailwind after the caution Lockheed exhibited in mid-2016 about the cost of future payments.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

January 23, 2017 14:13 ET (19:13 GMT)

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