Lockheed Martin Warns on 2025 Profit, F-35 Tech Upgrade Delays Bite

Lockheed Martin (LMT) has issued a cautionary note on its 2025 profit outlook, citing delays in the rollout of the Technology Refresh 3 (TR-3) upgrade for the F-35 Lightning II stealth fighter jet. The delays, which have already led to a significant backlog of jets at Lockheed Martin's facilities, are expected to impact the company's revenue and earnings in 2025.

The TR-3 upgrade, which was supposed to be ready by April 2023, has been delayed by a full year due to issues between the F-35's hardware and the TR-3 software coding. The Pentagon halted deliveries of F-35s in July 2023, leading to a substantial backlog of jets at Lockheed Martin's facilities. The first two TR-3 configured F-35s were delivered in July 2024, but they were equipped with a truncated version of the software, only enabling combat training missions. The full TR-3 combat capabilities are expected to be delivered in 2025.

The delays in TR-3 rollout have had ripple effects on the F-35 program. Air Force Secretary Frank Kendall stated that Block 4 upgrades have been "delayed substantially" due to the TR-3 holdups. The F-35 program is now rethinking Block 4 to ensure it has the right strategy for the upgrades, which could lead to further delays and increased costs.

Lockheed Martin's F-35 program contributes about 30% of the company's revenue, and the delays in TR-3 deliveries could result in lower sales and earnings for the company in 2025. Additionally, the increased costs associated with the TR-3 upgrade and the rethinking of Block 4 could further impact Lockheed Martin's financial performance.

Investors should be aware of the potential impact of these delays on Lockheed Martin's stock price and consider the long-term implications for the company's growth. While the F-35 program remains a critical component of Lockheed Martin's business, the delays and setbacks could impact the company's ability to maintain its market share and achieve its long-term growth objectives.

In conclusion, Lockheed Martin's warning on its 2025 profit outlook highlights the significant impact that the delays in the F-35 TR-3 upgrade rollout have had on the company's financial performance. Investors should be aware of the potential long-term implications for the company's growth and consider the steps Lockheed Martin is taking to address these challenges and rebuild investor confidence.