Ukraine, Israel bill to bolster Lockheed, RTX profits By Reuters

By Mike Stone

Washington (Reuters) – Lockheed Martin Corp (NYSE:) and RTX Corp, which have seen a new wave of orders in response to Russian aggression in Ukraine and the war in Gaza, will benefit from $95 billion in mostly new weapons financing as increasingly protracted conflicts renew demand for expensive equipment.

On Wednesday, President Joe Biden signed a hard-won bill into law that provides billions of dollars in new U.S. aid to Ukraine in its war with Russia, including $61 billion for Ukraine and $26 billion for Israel.

“There are now plants under construction across the country” thanks to the new funding and several recent “supplemental” funding rounds, Bill LaPlante, the Pentagon’s chief of procurement, said on Wednesday.

The fighting in Ukraine and Israel has consumed large amounts of munitions, including Patriot air defense interceptors, used to shoot down Russian missiles, and large quantities of 155mm artillery rounds.

The new money will pay for new shipments and will be used to replenish piles of U.S. inventory. European allies are also preparing to buy American weapons due to the war in Ukraine and the desire to strengthen NATO.

The United States needs to purchase and restock Tomahawk, AMRAAM, Coyote, and SM-6 missiles, RTX Chief Financial Officer Neil Mitchell told Reuters in an interview, and listed a long-range cruise missile, an air-to-air missile, a small drone, and cruise missiles. A ground-based missile that can be used for air defense. In most cases, the United States sent munitions to Ukraine or used them to defend shipping lanes in the Red Sea.

Jim Taiclet, Lockheed's CEO, told investors Tuesday that he expects “the fiscal year 2025 presidential budget requests and additional additional funding will provide a strong foundation for the future growth of our company over the next several years.”

However, due to uncertainty about when funding will flow to defense companies, neither Lockheed nor RTX, formerly known as Raytheon Technologies (NYSE:), raised its 2024 sales forecasts.

“I don't expect flash sales to be any faster,” RTX's Mitchell said, adding that he thinks contracting may be “a little faster” this time around. Defense contracting is a slow and legally complex process.

“The bottom line is that, you know, we've had a lot of orders. There's $77 billion of defense backlog that we have. So, it's going to take some time to fill those orders,” Mitchell said.

RTX makes Patriot, which stands for Phased Target Interception Radar System, a surface-to-air missile defense system.

Lockheed makes the latest version of the interceptors that arm Patriot, known as PAC-3 MSE, which cost about $4 million each, according to Army budget documents.

In January, European countries agreed to purchase up to 1,000 Patriot interceptor missiles. European production of this order, a type of Patriot interceptor called Guidance Enhanced Missiles, or GEM-T, will likely be completed by COMLOG, a joint venture between RTX and MBDA, where current production capacity is limited.

But Patriot is just one of the systems that needs investment to expand production capacity before more revenue can flow in.

In the additional $95 billion, more than $17 billion was allocated for investment to expand the production capacity of the US defense industrial base, including the production of 155 mm missiles, and $3.3 billion for shipyards.