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Lockheed Martin Projects Sales Surge on Increased Military Spending

Lockheed MartinLeading weapons and aerospace company Lockheed Martin Corp. expects a jump in its sales next year as a result of higher military spending, both within and outside the United States.

Sales will grow by roughly 7 percent to $50 billion in 2017, the company said in a statement on Tuesday. This rise is expected to be driven by orders for F-35 jet fighters and missile defense systems.

The projected boost in sales will also be contributed to by the Sikorsky helicopter business, which Chief Executive Marillyn Hewson acquired from United Technologies Corp. in a $9 billion deal.

“Their outlook for 7 percent revenue growth next year is pretty impressive,” Bloomberg Intelligence aerospace and defense analyst Douglas Rothacker said, as reported by the Denver Post. “Granted, not many have given 2017 outlooks yet, but I think you’d be hard-pressed to find a defense contractor generating growth like that.”

Orders for the F-35 jets by America’s allies, such as the U.K. and Japan, will likely boost exports to roughly 30 percent of Lockheed Martin sales over the coming four years, reaching an amount double that of four years ago.

Hewson has embarked on restructuring of the world’s largest defense contractor over the past year. The company has increased its stake in the nuclear deterrent program of the U.K. by 18 percent, while selling its information technology division to Leidos Holdings Inc. The company’s CEO wants it to focus more on aircraft and missiles.

The F-35 fighter jets constitute a major contributor to the sales and profit of Lockheed Martin and other defense contractors. They make up about a fifth of sales by the Bethesda, Maryland-based weapons company.

The production of the jets has been slowed by funding and other challenges, with this delaying their entry into service in the U.S. Fuel tank issues have slowed deliveries and caused some aircraft to be grounded.

On an investor call, Lockheed Martin Chief Financial Officer Bruce Tanner disclosed that production issues are not likely to be resolved before next year.

The leading defense contractor is reportedly locked in negotiations with the Pentagon, which is believed to be seeking for better deals on the F-35. Cash from operations would exceed $5.7 billion if talks with American defense officials are concluded this year, the company said.

Lockheed Martin’s sales during the third quarter rose 15 percent to $11.55 billion, beating analysts’ estimate of $11.5 billion. Profit jumped to $2.4 billion, or $7.93 a share, up from $865 million or $2.77 a share a year ago.

The company has forecast very strong full-year results. It expects sales for 2016 to reach $46.5 billion, rising from an earlier expectation of between $46 billion and $46.2 billion. Profit for the year is now expected to come in at $12.10 per share, up from earlier estimate in the rangeof$11.15to$1.45 a share.

Lockheed shares gained 7.4 percent to $249.26 on Tuesday, making the company the biggest gainer on the Standard & Poor’s 500 Index. It was reportedly the highest intraday rise since April 2009.

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