Dec 23 Lockheed Martin Corp led defense
stocks lower on Friday after U.S. President-elect Donald Trump's
latest Twitter salvo over the cost of the company's F-35 fighter
jet, in which he said he had asked rival Boeing Co to
"price-out" an older aircraft as an alternative.
Lockheed shares were down about 0.8 percent in morning
trade, nearing their lowest levels since the Nov. 8 election and
serving as the biggest drag on a basket of defense-related
stocks. Boeing's stock was also down, by about 0.2
Trump posted his Twitter message late on Thursday, a day
after he met with the chief executives of both aerospace
"Based on the tremendous cost and cost overruns of the
Lockheed Martin F-35, I have asked Boeing to price-out a
comparable F-18 Super Hornet!" Trump said.
The practical implications of Trump's actions were unclear,
given that the F-18 is an older generation aircraft that lacks
the stealth capabilities of the F-35. Most defense
analysts do not consider the two as comparable aircraft.
"Impractical if not irrational," Richard Safran, a defense
analyst at Buckingham Research, said by email. "First, the
F/A-18 is a carrier-based naval fighter. Certainly it could not
meet the U.S. Marine Corps need for vertical lift. It would not
be suitable for the Air Force either - the extra weight of a
carrier fighter makes it less than ideal for the Air Force."
"Unless the rules of physics have changed, you cannot make a
non-stealthy two-engined, carrier-based aircraft from the 1980s
into a single-engine, multi-role stealthy fighter from the
2000s," Vertical Research Partners analysts wrote in a note
early on Friday.
Still, Trump's dissatisfaction with the program, which has
been dogged by problems while costs have escalated to an
estimated $379 billion, is a clear risk for Lockheed. The F-35
program is a critical sales generator for the company,
accounting for 20 percent of last year's total revenue of $46.1
Lockheed Martin late on Thursday declined to comment on
Trump's comments and did not immediately respond to a follow-up
request for reaction on Friday morning. The Pentagon did not
respond to a request for comment on Thursday.
Boeing spokesman Todd Blecher said on Thursday in an email
that the company was committed to providing the capability and
affordability to meet national security needs.
On Wednesday, Trump met the CEOs of Lockheed and Boeing at
his resort in Palm Beach, Florida. Boeing CEO Dennis Muilenburg
told reporters there that he had guaranteed costs would not get
out of control for a replacement to Air Force One, the
presidential plane, another project Trump calls too expensive.
Lockheed CEO Marillyn Hewson did not speak to reporters but
said in a statement that the meeting was "productive." Trump
told reporters he wanted to cut the F-35 program's costs.
Trump's jockeying for leverage via his Twitter account is
likely to be a hurdle for all U.S. defense contractors, Roman
Schweizer, aerospace and defense analyst at Cowen & Co, wrote in
a client note on Thursday.
"We have no idea how this plays out but believe 'Twitter
risk' for defense companies could be a significant issue over
the next four years," Schweizer wrote. "This is Lockheed
Martin's time in the barrel."
(Additional reporting by Emily Stephenson in Hawaii, Jeffrey
Dastin in Los Angeles, Mohammad Zargham and Idrees Ali in
Washington and Andrea Shalal in Berlin; Writing by Dan Burns;
Editing by Meredith Mazzilli)