Lockheed Martin Faces Order Cut for Flagship Fighter Jet

While recent quarterly figures from the U.S. defense contractor were robust, clear warning signals are now emerging. News from Switzerland is giving investors pause: significant cost overruns have forced the Alpine nation to scale back its order for the flagship F-35 fighter aircraft. This development is dampening sentiment and prompting a more cautious stance among analysts.

Despite the negative European news, Lockheed Martin's core financial metrics remain solid. The company's latest quarterly report showed a pronounced earnings beat, with EPS coming in at $6.95 against expectations of $6.33. Revenue also saw healthy growth, climbing 8.8% to $18.61 billion.

Concurrently, the corporation is advancing its expansion. A new assembly facility in Alabama for the "Next Generation Interceptor" program is nearing completion. Furthermore, a key technical milestone was achieved with the integration of the Meteor missile onto the F-35A platform, a move expected to bolster the jet's appeal for other European partners such as the United Kingdom and Italy.

Switzerland Reduces Its F-35 Commitment

The primary concern for markets centers on the Swiss government's decision to trim its procurement package for the F-35A Lightning II. Switzerland had initially committed to purchasing 36 aircraft. However, authorities in Bern confirmed on Friday that the full fleet is no longer affordable within the legally binding budget cap of 6 billion Swiss francs (approximately $6.6 billion) approved by voters.

This reversal stems from a cost overrun of about 1.3 billion francs. Officials cite three specific drivers:
* Inflationary pressure on raw materials
* Persistent supply chain disruptions
* Delays to the "Technology Refresh 3" (TR-3) upgrade

Should investors sell immediately? Or is it worth buying Lockheed?

With the budget ceiling fixed, reducing the number of units is the only viable path. For Lockheed Martin, this represents a direct hit to its order backlog. Market observers also note the risk that other nations facing similar fiscal constraints could follow Switzerland's lead.

Wall Street Adopts a Cautious Tone

The reaction from financial analysts was swift. Deutsche Bank lowered its price target for Lockheed shares from $517 to $492 on Saturday, maintaining its "Hold" rating, which suggests limited near-term upside potential.

Citigroup, which initiated coverage of the stock on December 12, also positioned itself defensively with a "Neutral" rating and a $505 target. The overall analyst consensus is shifting noticeably toward "Hold" as experts weigh the tension between strong operational performance and the risks associated with government contracts.

Lockheed Martin's stock, which closed Friday at 408.90 euros, is now in a consolidation phase. Investors face the task of determining whether the attractive valuation and strong outlook for 2025 are sufficient to offset the concrete order reduction in Switzerland and the increasingly guarded analyst commentary.