LMT Stock: Is Donald Trump Wrong About This at Lockheed Martin?

LMT stockLockheed Martin Stock Gets Hit by Donald Trump Tweet

Lockheed Martin Corporation (NYSE:LMT) becomes the latest company to be hit by a Trump tweet. After spooking investors with his tweets on tech giants like Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN), Trump’s current focus has shifted to the defense contractors.

Just a few days back, Trump had threatened to cancel the Boeing Co (NYSE:BA) order for the new presidential planes as he considered the costs to be too high. LMT stock plunged by over five percent early in the day but recovered later.

This is what Donald Trump tweeted on Monday morning:

In its official statement, Lockheed Martin said that it welcomes the opportunity to address any questions that the president-elect has about the program. Lockheed Martin and its industry partners understand the importance of the affordability for the “F-35” aircraft program. The company further said that since the beginning, it has invested large sums of money to reduce the price of the airplane by 60%. (Source: “Lockheed Martin Statement on F-35,” Lockheed Martin Corporation, December 12, 2016.)

Although Lockheed Martin stock took a plunge yesterday, the company has posted an almost 20% return over the last year as compared to the 15% posted by the S&P 500.

In response to the tweet, Senator John McCain said that, while a president cannot cancel a program after funds have been allocated, he can decide to reduce the purchase over time. Senator Richard Blumenthal criticized Donald Trump, saying, “The suggestion that costs are out of control is just plain wrong.”

Blumenthal added that Trump should “learn more about the facts” before discussing “arbitrary cuts in the program.” The senator also said that the program supports 2,000 jobs at F-35 engine-maker Pratt & Whitney and thousands more at suppliers. (Source: “Trump attack on Lockheed Martin foreshadows war on defense industry,” Reuters, December 12, 2016.)

Lockheed Martin stock (LMT stock) was not the only stock that went down on Monday. Other defense stocks also took a beating.

Jeff Babione, Lockheed Martin’s F-35 program leader, emphasized that the F-35 has amazing technology, and whoever has it will posses the most advanced air force in the world. He says that’s why it’s important that the U.S. and its partners have the aircraft. According to Reuters, Australia and Japanese defense officials both said that they have no plans to alter their commitments to the F-35.

LMT stock had also taken a beating last week when Donald Trump had threatened Boeing. Earlier, defense stocks had gained on the optimism that the Trump administration would increase military spending. But now it appears that Trump’s stance would lower the profit margins for defense contractors.