U.S. defense contractor Lockheed Martin has reached a framework agreement with the U.S. Defense Department to supply 850 F-35 stealth fighter jets over the next decade. The jets alone are worth at least $78.2 billion (about 103.65 trillion won), making it one of the largest arms programs ever. With geopolitical tensions driving demand for advanced weapons, Lockheed Martin also raised its full-year revenue and profit outlook.
Reuters reported on the 22nd that Lockheed Martin and the U.S. Defense Department announced a framework agreement covering long-term production and sustainment of the F-35 Lightning II. The agreement covers 850 jets for the United States along with orders from overseas customers, initial spare parts, upgrade equipment and maintenance support.
On that basis, Lockheed Martin and the Pentagon plan to keep F-35 output for U.S. and overseas customers at about 156 aircraft a year. A formal purchase contract has not yet been signed. Specific pricing and delivery schedules will be set once Congress approves a multiyear contract and secures funding.
The $78.2 billion figure is a minimum estimate, based on multiplying 850 jets by $92 million (about 121.9 billion won), the unit price of the cheapest variant. The F-35B, a short-takeoff and vertical-landing version for the Marine Corps, costs $121 million (about 160.4 billion won) per aircraft, while the Navy's F-35C costs $110 million (about 145.7 billion won). The final contract value could grow depending on the mix of variants ordered and increases in prices and labor costs.
Lockheed Martin will invest at least $7 billion (about 9.27 trillion won) of its own funds to support the F-35 program. The money will go toward expanding production facilities and the parts supply chain, as well as strengthening maintenance facilities and specialized staffing.
As the number of F-35s in service grows, demand for parts repair and maintenance is rising with it. Some smaller suppliers are diverting equipment and workers intended for new parts production to repair work, hurting production efficiency. OJ Sanchez, president of Lockheed Martin Aeronautics, said the investment would help expand not only the capacity of current production lines but also the supply chain, facilities and maintenance workforce.
Buoyed by rising defense demand, Lockheed Martin lifted its full-year revenue forecast to $80 billion to $82 billion from $79.75 billion to $81.75 billion. It also raised its earnings-per-share outlook to $30.35 to $30.75 from $29.95 to $30.65.
Third-quarter revenue rose 11% from a year earlier to $20.71 billion (about 27.42 trillion won), beating market expectations of $20.51 billion. Earnings per share came in at $7.97, above the consensus estimate of $7.43.
Missiles and military aircraft drove the improvement. Revenue at the missiles unit rose 24% on increased production of the Patriot Advanced Capability-3 (PAC-3) interceptor and the Terminal High Altitude Area Defense (THAAD) system, while aeronautics revenue climbed 13% on the F-35 and C-130 transport programs.
Backlog hit a record $292 billion (about 386.6 trillion won), up 27% from the previous quarter. A $52.5 billion (about 70 trillion won) multiyear contract for upgraded PAC-3 interceptors, heavily used by the United States and its allies in the war with Iran, was a major contributor to the increase.
The company also raised its free cash flow forecast for the year to $7.8 billion to $8 billion from $7 billion to $7.2 billion. Lockheed Martin shares jumped as much as 10% in New York trading after the earnings report and news of the long-term supply agreement.
A growing number of U.S. defense companies are raising their earnings outlooks as demand increases for ammunition, air defense systems and military aircraft. RTX and Northrop Grumman also recently lifted their annual forecasts.