What happened
Shares of defense contractor pure play Lockheed Martin (LMT 0.72%) tumbled in late-morning trading on Wednesday, down 6.9% as of 11:50 a.m. EDT.
Turns out, no sooner did Lockheed Martin get some good news -- than some bad news followed.
Lockheed Martin's F-35 -- here viewed head-on -- could be a headache for Lockheed Martin today. Image source: Getty Images.
So what
On Monday this week, as you may have heard, Lockheed Martin investors were thrilled to learn that the German Luftwaffe is planning to purchase as many as 35 new F-35 stealth fighter jets from Lockheed Martin, to replacing its aging Tornado fighter-bombers.
The previous German administration had been leaning more toward buying "fourth-generation" Boeing (BA +2.46%) F/A-18 fighter jets for this purpose, but under the new administration of Chancellor Olaf Scholz, and in light of current geopolitical events, it appears Germany is now leaning toward Lockheed's more advanced fifth-generation jets. (No price tag on the purchase has yet been announced.)
But then the bad news arrived today: Bloomberg is reporting that instead of buying 94 new F-35s for the U.S. Air Force in its fiscal year 2023 budget, the Pentagon is now contemplating a purchase of just 61 jets. This reduction in the volume of planned purchases amounts to 33 planes -- essentially wiping out the benefit for Lockheed from all the German orders.
Now what
Now before you go and panic (which seems to be precisely what other investors are doing today), Lockheed Martin notes that the FY 2023 defense budget is not yet set in stone, and it's premature to speculate on how many F-35s the Pentagon might or might not end up buying from Lockheed.
For that matter, the Pentagon itself demurs that "the Department [of Defense] cannot confirm specific budget details until after the FY23 President's Budget is released." And the likelihood that the U.S. government will actually follow through on its reported plan to reduce the size of the defense budget (from $778 billion in 2022 to just $770 billion in 2023) seems...well, it seems remote given current events.
That being said, initial indications don't look great for Lockheed Martin today. And that, in a nutshell, is why you're seeing Lockheed Martin stock going down.
