Companies with a strong defense portfolio continue to thrive in 2020 despite the pandemic. Lockheed Martin and Northrop Grumman, which reported 3rd-quarter earnings this week, increased their projected revenue totals for the year.
Lockheed’s projected sales rose to about $65.25 billion, up from its July estimate of $63.5 billion to $65 billion. Northrop now expects 2020 sales of $35.7 billion to $36 billion, up from $35.3 billion to $35.6 billion in July. If Lockheed hits its new estimate, its sales would be up 9 percent over last year. If Northrop does, sales would be up between 5.5 percent and 6.4 percent.
And more increases are expected. “The corporation expects its 2021 net sales to increase to greater than or equal to $67 billion,” Lockheed said.
Northrop projects its 2021 sales will be in the “low-to-mid $37 billion range,” according to CFO Dave Keffer. That’s even as the company predicts COVID-19 will continue to depress its commercial programs.
Why it matters: Lockheed and Northrop have mostly defense portfolios, as opposed to fellow giants Boeing and Raytheon Technologies, which have large commercial aerospace businesses. The companies continued ability to hit revenue targets even as they modify work schedules and protect their employees from the coronavirus demonstrates how defense projects have been largely insulated from the pandemic woes that have devastated over industries.
Classified projects are all the rage: There was a lot of talk on Lockheed’s Tuesday earnings call about classified projects. Lockheed CFO Ken Possenriede mentioned a “large classified program that we have” in the company’s Missiles and Fire Control business. “We will start to see, in the next four to five years, that go into a limited rate production and then ultimately into production, and you will see a large increase there as well,” he said. (Is Lockheed Building the Air Force’s Secret Fighter? Officials won’t confirm or deny it.)
Northrop on Thursday reported increased classified sales in its Aeronautics Systems divisions. (Does the Falls Church, Virginia, company have a piece of the Next Generation Air Dominance program?). Boeing will report earnings next week, so we’ll leave more speculation about its possible role in NGAD until then.
Of note: Unlike her peers, Northrop Grumman CEO Kathy Warden has not publicly lobbied Congress to appropriate money to cover its coronavirus-related expenses. But regulatory filings show that the company is making its pleas behind closed doors.
“The company has begun to seek, and anticipates continuing to seek, recovery for certain COVID-19-related costs under Section 3610 of the CARES Act and through our contract provisions,” the company wrote in its 10-Q filing this week.
Reminder: Congress authorized this funding in the CARES Act, but didn’t appropriate the money.
Raytheon, General Dynamics, Boeing, and L3Harris Technologies all report third-quarter earnings next week.
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From Defense One
Editor's Notebook January 1996
AID'S IDEA: CUT COSTS BY LEVERAGING DEVELOPMENT DOLLARS
Milley Speaks Out — and Trump Stays Mum // Katie Bo Williams
After a controversial summer, the Joint Chiefs chairman is holding his own with a string of public pronouncements.
Congress Approved $23.1B for Military Intel in FY20
That’s up from the $21.5 billion provided in 2019, according to figures released by the Pentagon this week. It’s slightly higher than the $22.95 billion than DOD leaders said they requested for intel programs in fiscal 2020. As it happens, Pentagon leaders are asking for another $23.1 billion for intelligence projects in fiscal 2021.
Separately, Congress appropriated $62.7 billion to the National Intelligence Program for 2020, according to the Office of the Director of National Intelligence.
BAE Unveils Skyborg Concept
The company released a concept image depicting three drones flying alongside what appears to be a Tempest next-generation fighter jet that’s being developed by the United Kingdom. BAE is one of 13 teams awarded contracts as part of the Air Force’s Skyborg project to create attritable drones that could be teamed with manned fighter jets.
Meanwhile, a similar type of drone being developed by Boeing for Australia taxied under its own power for the first time. It’s expected to fly for the first time later this year.
US Greenlights $1.8B in Arms Sales for Taiwan
And not surprisingly, China isn’t happy about it. “China will make a legitimate and necessary response according to how the situation develops,” China's Foreign Ministry spokesman Zhao Lijian, said, according to Reuters. On Wednesday, the U.S. State Department OKed the sale of:
- 135 AGM-84H Standoff Land Attack Missile Expanded Response (SLAM-ER) missiles, valued at $1 billion.
- 11 High Mobility Artillery Rocket Systems (HIMARS) M142 Launchers and 64 ATACMS ballistic rockets valued at $436.1 million.
- 6 MS-110 Recce Pods valued at $367.2 million.
Teams Forming for Army Combat Vehicle Contest
After its first contest to replace the Bradley fighting vehicle fell apart, the Optionally Manned Fighting Vehicle do-over competition appears poised to have more than one bidder. Germany’s Rheinmetall is partnering with Textron Systems and BAE System is partnering with Elbit Systems of America. General Dynamics Land Systems — the only company to submit an eligible bid in last year’s contest — is also expected to bid.
What’s new: Rheinmetall, which created a joint venture with Raytheon to enter the last competition, is now teaming with Textron Systems. Raytheon remains part of the Rheinmetall team, however not in the prominent role it had last time. Recall last year when the Army refused to accept a bid from Raytheon and Rheinmetall because the company’s could not get a Lynx fighting vehicle from Germany to the United States on time.
Also, BAE Systems is teaming with the American arm of Israel’s Elbit. “This teaming arrangement will explore crew automation, vehicle protection systems, and other defensive and offensive systems for integration into turrets of various cannon calibers and supporting weapon systems for combat vehicles,” BAE said in a Wednesday statement.
FLIR wants in too. The company “has a lot of technology that’s applicable to OMFV,” Tom Frost, vice president and general manager of unmanned ground systems at FLIR, said in a Thursday conference call with reporters. “We are certainly open to teaming on OMFV and providing that technology to various partners.” The company already partners with Textron Systems to build a robotic vehicle prototype for the Army.
Cost of New ICBM Rises, Already
The cost of the Minuteman III replacement intercontinental ballistic missile has risen from $85 billion to $95.8 billion, according to Bloomberg and AP. The Air Force has yet to say why the project cost has shot up nearly $11 billion from the previous estimates. Last month, the service awarded Northrop Grumman a $13.3 billion deal for engineering and manufacturing development. Boeing had been competing, but did not submit a bid to build the new ICBM, called the Ground-Based Strategic Deterrent, saying the contest parameters favored Northrop.
An Assessment of U.S.-China Technology Ties
The Johns Hopkins Applied Physics Lab this week released “a series of papers delving into American and Chinese efforts to control what has become a complex techno-trading system and a struggle over the terms of interdependence in a relationship that cannot be completely ended,” You can read them here.
Flying into the Sunset
The U.S. Marine Corps retired the Bell AH-1W Super Cobra attack helicopter after 34 years in service. “AH-1Ws remanufactured into AH-1Z Vipers will continue to serve in the United States Marines,” Bell said in an Oct. 19 statement. “The four-bladed Viper replaces the Super Cobra as the successor to the modern attack helicopter platform and provides fully-integrated air-to-air and anti-armor capabilities designed to successfully accomplish the broadest array of contemporary missions.”
- Marine Corps Commandant Gen. David Berger relieved Maj. Gen. Stephen Neary of command of Marine Corps Forces Europe and Africa on Oct. 19 for Nearly’s alleged use of a racial slur. Col. James Iulo has been named acting commander until a replacement is determined.
- Retired Air Force Gen. Mike Holmes has joined The Roosevelt Group, a government affairs and strategic advocacy firm specializing in defense, intelligence, and national security.
- Retired Air Force Maj. Gen. Mike Fantini has joined national security strategic advisory firm Pallas Advisors as a principal. He previously was the director of Air Force Warfighting Integration Capability.
- Secure messaging platform Wickr has created a federal advisory board that includes Matt Olsen, chief trust and security officer, Uber (former director of the National Counterterrorism Center); Vince Stewart, chief innovation and business intelligence officer of Ankura (a former deputy commander of U.S. Cyber Command and former Defense Intelligence Agency Director); Jan Tighe, former deputy chief of naval operations for information warfare and director of naval intelligence; and Joanne Isham, former deputy director of the National Geospatial Intelligence Agency.
- SRC has hired Judy Lewis, a former Raytheon Technologies executive, as the new vice president for strategy.