Typically, the quarterly reports of U.S. defense giants are a bit of a snooze for space sector watchers. While these companies have space divisions that bring in billions of revenue each year, and I dutifully check in each quarter to see how things are going, the defense primes’ leadership often treat space as a bit of an afterthought.
Performance-wise, their space units are historically steady, with national security sales making up most of those divisions’ revenue each year. But, when Lockheed Martin and Northrop Grumman both reported 2023 results this week, it was a different story.
For both companies, space was the top segment for sales growth in 2023 — by a wide margin. Lockheed’s space unit saw sales grow 9% year over year, versus 2% or less for other segments, while Northrop’s space unit grew sales by 14% year over year, versus 5% or less for other segments.
You’d think with such strong results, space would be a highlight of quarterly earnings calls. But for both Lockheed and Northrop, executives and analysts still only mentioned space in passing. To be fair to those on the calls: Space sales last year were $12.6 billion for Lockheed and $14 billion for Northrop, making up 19% and 36%, respectively, of their total 2023 sales.
Northrop’s call had a bit more insight into why the company isn’t as jazzed about space as the unit’s results would suggest. Northrop leadership said “a lot of our customers are having to address budget prioritization” in years ahead, noting “some shifts in budget priorities.” They weren’t more specific on which parts of its space business are feeling those shifts, only noting that the shift is expected to see “declines in a restricted program.” Yet, Northrop is still confident that those declines will be “more than offset by growth in other parts of the space portfolio.”
Both companies also called out the same highlight: ULA’s recent successful Vulcan rocket debut. Lockheed owns half of ULA and Northrop makes Vulcan’s solid rocket boosters.
ULA’s owners Boeing and Lockheed are reportedly getting close to selling the rocket company, and when my colleague Morgan Brennan spoke to Lockheed CFO Jay Malave earlier this week, he had this to say:
“They had a successful Vulcan launch, which we’re very excited about – very proud of that result. You know, we like the business. It’s got a strong book of business, excellent backlog, it’s got the national security launches … so we’re happy with that business. We’ve got a good partner with Boeing on that and we’re satisfied with where that business is. As far as anything else, we just really won’t comment on that.”
