Tags: Donald Trump | Defense | Companies | Spending

Defense Companies Lift Forecasts But Brace for Looming Budget Battle

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Thursday, 27 Jul 2017 01:21 PM

Top U.S. weapons makers reported better-than-expected quarterly results and raised their full-year forecasts, buoyed by higher demand for fighter jets and tanks amid heightened security concerns around the world.

However, an upcoming budget battle on Capitol Hill could dampen defense spending.

General Dynamics Corp and Northrop Grumman Corp joined Lockheed Martin Corp in reporting strong profit numbers that showcased robust demand from international markets.

"The international marketplace is robust right now for us and our peers," Northrop Chief Executive Wes Bush said on a post earnings call with analysts.

Bush said that while he expected growth rates in the Asia Pacific to remain high, given the geopolitical dynamics of the region, he sees Middle East and Europe as "quite important".

Lockheed, the world's largest weapons maker, smashed Wall Street estimates when it reported last week and said it expected increased defense spending under President Donald Trump to underpin its earnings this year.

Trump is seeking a $54 billion increase in overall defense spending, a proposal that must be passed by Congress and faces skeptical lawmakers. A political gridlock in Washington could stall the process further.

General Dynamics Chief Executive Phebe Novakovic sounded cautious while discussing the current defense environment in Washington on a post-earnings call.

"Right now it's a giant fur ball, and we're going to have to work through the process and see what comes out the other side," she said.

Shares of U.S. defense companies have rallied since November on Trump's promises during his election campaign to spend more on defense. Northrop shares were flat in afternoon trading, while those of General Dynamics were down 4 percent.

General Dynamics, maker of Gulfstream jets, tanks and U.S. Navy ships, reported a rise in second-quarter profit and said it sees demand for Abrams tanks increasing both in U.S. and abroad.

"While we think these results were OK ... they were against fairly high expectations and further marred by a downward revision in aerospace," Vertical Research Partners analyst Robert Stallard said.

Northrop's aerospace systems business, which makes manned aircraft and drones, reported a 14 percent rise in sales.

The company is expected to benefit from increased demand for F-35 fighter jets. Northrop supplies the center fuselage for the stealthy jets.

Lockheed's F-35 program is the Pentagon's costliest arms program and has been criticized by Trump and other U.S. officials for being too expensive.

The U.S. Department of Defense said on July 10 it plans to purchase 2,456 F-35 jets, up from 2,443.

Boeing Co's military aircraft sales fell 4 percent to $6.8 billion. But profit jumped 50 percent and margins widened 4.6 percentage points, helped by cost cutting. 

© 2017 Thomson/Reuters. All rights reserved.

 
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Top U.S. weapons makers reported better-than-expected quarterly results and raised their full-year forecasts, buoyed by higher demand for fighter jets and tanks amid heightened security concerns around the world. However, an upcoming budget battle on Capitol Hill could...
Defense, Companies, Spending
437
2017-21-27
Thursday, 27 Jul 2017 01:21 PM
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