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Will Trump's Tweet Spark a War between Lockheed & Boeing?
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In yet another of his controversial tweets, President-elect Donald Trump has slammed Lockheed Martin Corp. (LMT - Free Report) for its ‘tremendously’ costly F-35 program and urged The Boeing Company (BA - Free Report) to ‘price out’ F-18 Super Hornet. Notably, F-18 is a less expensive fighter jet compared to F-35, manufactured by Lockheed’s aerospace rival, Boeing.
As anticipated, following the tweet Lockheed Martin’s stock declined 2% in the after-market trading session yesterday while Boeing climbed 0.7%.
A Brief Analysis of the Tweet
Interestingly, this tweet surfaced only a day after Trump met with the CEOs of the two companies. Lockheed Martin’s CEO described the meeting as a ‘productive’ one, wherein she had briefed him about how the company has been working on bringing down the cost of the F-35 fighter jet and “delivering an affordable aircraft”.
However, the briefing failed to convince Trump as he stuck to his views about the F-35 program being exorbitantly expensive (as told to Bloomberg).
On the other hand, Boeing’s CEO believes that it will be able to build a cost-friendly version of Air Force One that will be available for less than $4 billion. In fact, earlier this month, Trump had claimed that the exact cost of the Air Force One replacement program should ideally be around $4 billion and had also urged the federal government to cancel an order to Boeing, involving the remodeling of two Air Force One aircraft.
Apparently, Lockheed Martin failed to influence Trump in favor of its F-35 jets. However, there is also no concrete indication that Boeing has managed to do otherwise with respect to its Air Force One project. Despite this, Trump’s debatable Tweeter post might have cheered Boeing’s investors.
Pentagon’s Reaction
In response to Trump’s attack on the F-35 program, Pentagon’s Lieutenant General Christopher Bogdan, told reporters that the project has been on schedule and budget since 2011.
Earlier, Michael Gilmore, director of operational test and evaluation of the Department of Defense (“DoD”), faced strong opposition when he voiced doubts regarding this program and accused Pentagon officials of preparing a deceptive review of its progress. In particular, Pentagon’s spokesperson argued that only a couple of flights have faced stability issues, which have been placed under review (read more: Will Trump's Victory Spell Doom for Lockheed Martin's F-35?)
F-35 Vs F-18
Though Trump’s recent tweet apparently puts F-18 to direct competition with F-35, there are some stark differences between the jets. Lockheed Martin’s F-35 Lightning II is a single-seat, single-engine fifth-generation fighter aircraft, which comes with an advanced stealth feature. Meanwhile, Boeing’s F/A-18 Super Hornet is a twin-engine, supersonic, all-weather multirole fighter jet that is capable of landing and taking off from an aircraft carrier.
The basic differences between these jets are: F-18 Super Hornets are less expensive compared to F-35 while F-35 comes with a stealth characteristic to better evade detection in enemy airspace, at times of crisis.
Our View
Trump seems to have earned the “King of Controversies” title with his outrageous comments. His latest remark, targeting the top players in the aerospace and defense space and almost pitting them against each other, goes on to justify the title.
Considering the fact that the F-35 project has been suffering from some technical challenges for the past few years, investors had recently become skeptic regarding this project’s future. Trump’s tweet added fuel to this which impacted Lockheed Martin’s stock.
However, it is unlikely that this will lead to the replacement of F-35 with Boeing’s F-18 jets as the stealth option for the first type is a crucial necessity for a defense aircraft at the time of wars. Moreover, although F-18 is less expensive compared to F-35, the federal government will never compromise on the security of the nation for the sake of expenses.
In fact, in spite of the technical issues, F-35 remains the world’s largest defense program and accounts for a major share of revenue for Lockheed Martin. Over the past one year, the company gained 16%, outperforming the Zacks categorized Aerospace-Defense industry’s gain of 11%, owing to steady flow of contracts from the Pentagon and other international customers. This reinforces the fact that Lockheed Martin has been performing well when compared to the industry and the abrupt dip in its price is only a momentary event.
On the other hand, Boeing gained 9.3%, below the industry average. This is quite an underperformance when compared to other major players in the same space like Northrop Grumman Corp (NOC - Free Report) and General Dynamics Corp. (GD - Free Report) , both of which have beat the industry mark. The below-par price performance may have been triggered by budget volatility, uncertainties related to high-cost programs, risks associated with key project executions and order cancellations. Further, there is no indication that Trump favors Boeing in any way, if we consider his earlier attacks on the company’s Air Force One project.
Considering the above discussion, it seems like that this recent Tweet post of Trump is another of his bizarre political stunts and there lies no viable reason to believe that it will impact Lockheed Martin or for that matter boost Boeing’s shares, over the long term.
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Will Trump's Tweet Spark a War between Lockheed & Boeing?
In yet another of his controversial tweets, President-elect Donald Trump has slammed Lockheed Martin Corp. (LMT - Free Report) for its ‘tremendously’ costly F-35 program and urged The Boeing Company (BA - Free Report) to ‘price out’ F-18 Super Hornet. Notably, F-18 is a less expensive fighter jet compared to F-35, manufactured by Lockheed’s aerospace rival, Boeing.
As anticipated, following the tweet Lockheed Martin’s stock declined 2% in the after-market trading session yesterday while Boeing climbed 0.7%.
A Brief Analysis of the Tweet
Interestingly, this tweet surfaced only a day after Trump met with the CEOs of the two companies. Lockheed Martin’s CEO described the meeting as a ‘productive’ one, wherein she had briefed him about how the company has been working on bringing down the cost of the F-35 fighter jet and “delivering an affordable aircraft”.
However, the briefing failed to convince Trump as he stuck to his views about the F-35 program being exorbitantly expensive (as told to Bloomberg).
On the other hand, Boeing’s CEO believes that it will be able to build a cost-friendly version of Air Force One that will be available for less than $4 billion. In fact, earlier this month, Trump had claimed that the exact cost of the Air Force One replacement program should ideally be around $4 billion and had also urged the federal government to cancel an order to Boeing, involving the remodeling of two Air Force One aircraft.
Apparently, Lockheed Martin failed to influence Trump in favor of its F-35 jets. However, there is also no concrete indication that Boeing has managed to do otherwise with respect to its Air Force One project. Despite this, Trump’s debatable Tweeter post might have cheered Boeing’s investors.
Pentagon’s Reaction
In response to Trump’s attack on the F-35 program, Pentagon’s Lieutenant General Christopher Bogdan, told reporters that the project has been on schedule and budget since 2011.
Earlier, Michael Gilmore, director of operational test and evaluation of the Department of Defense (“DoD”), faced strong opposition when he voiced doubts regarding this program and accused Pentagon officials of preparing a deceptive review of its progress. In particular, Pentagon’s spokesperson argued that only a couple of flights have faced stability issues, which have been placed under review (read more: Will Trump's Victory Spell Doom for Lockheed Martin's F-35?)
F-35 Vs F-18
Though Trump’s recent tweet apparently puts F-18 to direct competition with F-35, there are some stark differences between the jets. Lockheed Martin’s F-35 Lightning II is a single-seat, single-engine fifth-generation fighter aircraft, which comes with an advanced stealth feature. Meanwhile, Boeing’s F/A-18 Super Hornet is a twin-engine, supersonic, all-weather multirole fighter jet that is capable of landing and taking off from an aircraft carrier.
The basic differences between these jets are: F-18 Super Hornets are less expensive compared to F-35 while F-35 comes with a stealth characteristic to better evade detection in enemy airspace, at times of crisis.
Our View
Trump seems to have earned the “King of Controversies” title with his outrageous comments. His latest remark, targeting the top players in the aerospace and defense space and almost pitting them against each other, goes on to justify the title.
Considering the fact that the F-35 project has been suffering from some technical challenges for the past few years, investors had recently become skeptic regarding this project’s future. Trump’s tweet added fuel to this which impacted Lockheed Martin’s stock.
However, it is unlikely that this will lead to the replacement of F-35 with Boeing’s F-18 jets as the stealth option for the first type is a crucial necessity for a defense aircraft at the time of wars. Moreover, although F-18 is less expensive compared to F-35, the federal government will never compromise on the security of the nation for the sake of expenses.
In fact, in spite of the technical issues, F-35 remains the world’s largest defense program and accounts for a major share of revenue for Lockheed Martin. Over the past one year, the company gained 16%, outperforming the Zacks categorized Aerospace-Defense industry’s gain of 11%, owing to steady flow of contracts from the Pentagon and other international customers. This reinforces the fact that Lockheed Martin has been performing well when compared to the industry and the abrupt dip in its price is only a momentary event.
On the other hand, Boeing gained 9.3%, below the industry average. This is quite an underperformance when compared to other major players in the same space like Northrop Grumman Corp (NOC - Free Report) and General Dynamics Corp. (GD - Free Report) , both of which have beat the industry mark. The below-par price performance may have been triggered by budget volatility, uncertainties related to high-cost programs, risks associated with key project executions and order cancellations. Further, there is no indication that Trump favors Boeing in any way, if we consider his earlier attacks on the company’s Air Force One project.
Considering the above discussion, it seems like that this recent Tweet post of Trump is another of his bizarre political stunts and there lies no viable reason to believe that it will impact Lockheed Martin or for that matter boost Boeing’s shares, over the long term.
Zacks Rank
Both Boeing and Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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