“Exceptionally strong” demand boosted sales at two US defense giants, the companies announced on Tuesday as geopolitical tensions flare in the Middle East and Ukraine continues to fight Russia’s invasion.
RTX and Lockheed Martin exceeded Wall Street’s expectations for the latest quarter as conflicts including Israel’s war on Gaza prompted countries to bolster arms spending, both by striking new deals and accelerating established contracts.
“The increasingly unstable geopolitical environment in the world today makes it essential for industry and government to strengthen our nation’s capabilities to deter and defend against further aggressive behavior against the US and our allies,” Jim Taiclet, Lockheed’s chairman and chief executive, said.
Global military expenditure reached a record high of $2,440bn last year. The US and China led the way.
Revenue at Raytheon, RTX’s defense division, rose 6% to $6.66bn in the latest quarter amid robust demand for its Patriot missile defense system. Profits at the division jumped 74% to $996m after the firm sold its cybersecurity business.
“If you just think about what’s going on out there today, the integrated air and missile defense, the demand there is exceptionally strong,” Chris Calio, chief operating officer at RTX, and the firm’s incoming chief executive, told analysts on Tuesday.
RTX is “well positioned” to capitalize on the military aid bills passed over the weekend by the House of Representatives, Calio added, amid “heightened demand from US allies”.
Lockheed, meanwhile, revealed that sales generated by its missiles and fire control division increased 25% to $2.99bn in the three months to 31 March. The increase was “primarily” down to higher sales of tactical and strike missile programs, it said. The division’s profits were dented by a $100m loss tied to a classified program.
The firm’s high mobility artillery rocket system and guided multiple launch rocket system are used by the Ukrainian military.
Planned US defense spending will provide “strong underpinning for future growth over the next several years for our company”, Taiclet told analysts on a conference call.
Shares in Lockheed increased 0.5% in New York on Tuesday. RTX gained 0.2%.
