Trump’s Shot at Lockheed Martin Corporation (LMT) Is More Bark Than Bite

Every company is fair game to the President-elect, if it needs to be held accountable

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If nothing else, President-elect Donald Trump is consistently unpredictable. Just a few days after he called out Boeing Co (NYSE:BA) for what he saw as an overpriced Air Force One jumbo jet, he put the white-hot spotlight on Lockheed Martin Corporation (NYSE:LMT) — via Twitter — for cost-overruns with its F-35 fighter jets.

Trump's Shot at Lockheed Martin (LMT) is More Bark Than BiteLMT stock fell a tolerable, but measurable, 1.2% in response, as Trump’s follow-up tweet asked Boeing for its best price on an alternative aircraft — the F-18 “Super Hornet.”

The threat was almost certainly meant to make a point, rather than to initiate a negotiation process with Boeing that would supplant the F-35 contact. In that regard, LMT shareholders don’t have a great deal to worry about right away.

On the other hand, Lockheed is clearly going to be held far more accountable than it has been in years, if not decades.

Trump Rattles the Cage

The exact tweet posted Thursday afternoon:

Based on the tremendous cost and cost overruns of the Lockheed Martin F-35, I have asked Boeing to price-out a comparable F-18 Super Hornet!

That wasn’t the first time LMT owners were a bit rattled by the President-elect’s publicized criticism of the impressive, but ridiculously expensive, fighter jet from Lockheed-Martin. It happened back on December 12th, too. This is the first time, however, that Trump threatened to find another option.

Like it or not, he makes a good point about cost overruns.

As of April this year, the F-35 program’s projected total cost for the contracted 2,457 jets had ballooned to $400 billion, or nearly twice the initially-expected price tag. Lockheed Martin is well behind schedule, too. The defense contractor had planned on delivering 1,013 of the aircraft by the end of the government’s last fiscal year, but had only delivered 179.

As Lockheed builds more, the per-plane price is supposed to go down. Given the gross misjudgment of the project’s price tag so far, however, that’s not an outlook Trump, nor the Department of Defense, can count on.

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Article printed from InvestorPlace Media, http://investorplace.com/2016/12/trump-shot-lockheed-martin-corporation-lmt-stock-more-bark-bite/.

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