Fitch lowers outlook on Lockheed Martin
8 June 2012
, by Kristin Jones (MarketWatch)http://www.marketwatch.com/story/fitch-lowers-outlook-on-lockheed-martin-2012-06-08Fitch Ratings Inc. lowered its outlook on Lockheed Martin Corp. as U.S. defense spending comes under pressure
Fitch affirmed the defense contractor's long-term debt rating at A-minus, four notches above junk level, but changed its outlook to negative, from stable.
Lockheed Martin is one of the biggest beneficiaries of U.S. defense spending, which has come under renewed scrutiny lately amid gaping federal budget deficits.
The defense contractor said last year it would cut thousands of jobs to cut costs.
Fitch's negative outlook also reflects the company's large cash payouts to fund its $13.3 billion pension deficit. Lockheed Martin's debt levels have climbed $2.8 billion in the past three years
, weakening the cushion for its current rating.
Ongoing labor strikes, primarily at the company's Fort Worth facility, could also affect financial results if they persist.
Fitch could raise the company's outlook to stable if Department of Defense budgets are more generous than expected.
Cost-cutting actions or changes in cash deployment efforts could also drive a return to a stable outlook.
The ratings firm may downgrade the rating in the event of a sharp decline in U.S. defense spending that affects some of the company's key programs.
Problems with the execution of key programs or more aggressive cash deployment could also result in a lower rating.
Standard & Poor's Ratings Services recently lowered its outlook on Lockheed Martin's rating to negative, saying defense spending cuts and a wider pension deficit would pressure the company's results.