A Lockheed Martin Corporation (LMT) quarterly report showed that the space segment of the business is increasing at the slowest rate, and its profitability is dropping altogether. Competition with SpaceX is the main reason, but the management of Lockheed claims that the space technology segment will expand the fastest.
The price competition with SpaceX in the field of payload production is unlikely, and SpaceX will hold a dominant role in the industry for decades with the arrival of the Starship vehicle.
Lockheed aims to circumvent SpaceX in another direction which is the space technology security section. In particular, Lockheed anticipates double-digit revenue growth from US missile defense contracts by the end of 2021. This will counter the decrease in revenue from SBIRS missile launch detection satellites as well as advanced communications and navigation satellites, EHF and GPS. As a result, it will provide a single-digit revenue increase for the entire space division of Lockheed.
For investors, however it is a challenging task to evaluate the long-term prospects for this sector of the defense industry. The truth is that Lockheed is aiming to make the key increase in financial indicators through the “explosive progress” of the classified part of the Pentagon’s space operations. New military satellite communication networks, which are often referred to as the 5G.mil architecture, can probably provide the greatest development.
However, Lockheed does not expect to boost the profitability of its space business, despite the expected revenue growth, and even predicts a decline in margins in 2021.
Thus in the coming years, Lockheed can only rely on revolutionary technology to battle SpaceX, such as a thermonuclear space reactor or a spacecraft for Mars.
The Lockheed Martin Corporation (LMT) stock fell 0.33 percent on Tuesday to conclude at $375.90 while its market capitalization remained $101.14 billion at close of the market.