(Reuters) -Lockheed Martin reported on Tuesday that its second-quarter profit plunged by about 80%, after the U.S. defense giant recorded pre-tax losses of $1.6 billion, mainly linked to a classified program within its Aeronautics segment.
The company’s shares fell 7.5% in premarket trading.
Net income fell to $342 million, or $1.46 per share, compared with $1.64 billion, or $6.85 per share, a year earlier.
Lockheed said the charge stemmed from difficulties with a classified program in its Aeronautics
business and certain international helicopter programs in its Sikorsky unit.
Defense contractors are grappling with mounting cost pressures as inflation and supply chain disruptions drive up expenses on long-term programs priced years ago.
Many of these contracts — often fixed-price — were negotiated before the post-pandemic surge in labor, material, and component costs, forcing contractors such as Lockheed to absorb overruns.
Apart from the $950 million charge on the classified program, Lockheed took a $570 million hit on its work for the Canadian government relating to the procurement of its CH-148 Cyclone maritime helicopters.
"The Company is in ongoing discussions with the customer regarding a potential restructure to certain contractual terms and conditions and to expand the scope of work that would be beneficial to both parties," Lockheed said of the program.
Excluding these charges, however, the defense giant posted an adjusted profit of $7.29 per share, beating estimates of $6.44 per share, per data compiled by LSEG.
"Overall, the company's foundation remains solid and resilient," chief executive Jim Taiclet said in the company's earnings statement.
Lockheed also missed Wall Street estimates for second-quarter revenue, which came in at $18.16 billion, compared with expectations of $18.57 billion.
(Reporting by Utkarsh Shetti in Bengaluru; Editing by Tasim Zahid)
