By Mike Stone and Utkarsh Shetti
WASHINGTON (Reuters) -Major U.S. defense contractors are mostly maintaining their financial forecasts for 2025, saying it is too soon to understand the impact of U.S. President Donald Trump’s tariffs.
Lockheed Martin, the largest defense firm, reaffirmed its forecasts for the year on Tuesday, buoyed by resilient demand for its missile systems and fighter jets. Similarly, Northrop Grumman said its profit margins may narrow, but stuck with its sales prediction, indicating some confidence in the face of trade tensions.
“We do not see, at this point in time, significant risk to our company related to the trade policies as we understand them today,” Northrop CEO Kathy Warden told analysts. “We’re going to monitor that closely and we’re already taking action to account for and mitigate the risks that we do see, particularly in availability of certain components that we need for delivering on our programs.”
RTX Corp, formerly known as Raytheon Technologies, broke ranks by expressing concern about potentially $850 million in reduced profits from new levies on metals and China. This divergence highlights the varying impacts of trade policies across the defense and commercial aerospace sectors.
RTX has large commercial aerospace businesses that make jet interiors and engines.
The defense industry, like other sectors with complex manufacturing operations, is grappling with the potential effects of a global trade war. The situation has pressured an already strained supply chain, forcing companies to reassess their strategies and cost structures.
Despite these challenges, the sector continues to benefit from a surge in global weaponry demand, fueled by the Russian war in Ukraine and conflict in the Middle East. This increased demand has helped offset some of the uncertainties stemming from trade disputes. However, RTX’s concern signals the industry is not immune to trade pressures, highlighting the complex interplay between defense spending, international relations, and economic policies.
A higher U.S. defense budget, suggested by Defense Secretary Pete Hegseth in an April 7 social media post, would benefit contractors’ revenues while providing some stability and growth, even amid an uncertain economic outlook.
Trump’s review of military equipment export rules, aimed at easing restrictions, could potentially boost revenues for U.S. contractors. However, this comes as some allies, including Canada and the European Union, are reconsidering their reliance on U.S. defense equipment due to trade tensions and shifting geopolitical alliances.
The European Union has outlined plans to shore up its own defense capabilities to reduce reliance on the U.S. by 2030, meaning any role for companies outside the bloc could diminish.
Northrop Grumman posted a 49% drop in first-quarter profit and missed sales expectations, as the U.S. contractor booked losses on its B-21 stealth bomber program due to higher manufacturing costs, sending its shares down 12%.
Lockheed reported higher first-quarter profit, boosting shares more than 2%. Lockheed quarterly earnings per share of $7.28 beat Wall Street analyst expectations of $6.34.
Collins Aerospace, RTX’s aerospace and avionics arm, posted an 8% rise in revenue that touched $7.22 billion in the quarter, while the Pratt and Whitney unit, which makes engines for Airbus’, A320neo jets, saw sales rise 14%.
Raytheon, RTX’s defense unit, reported a 5% fall in sales year-over-year, primarily driven by the divestiture of its cybersecurity, intelligence and services business completed last year.
(Reporting by Mike Stone in WashingtonEditing by Rod Nickel)
Brought to you by www.srnnews.com
