At a conference in New York Wednesday, Lockheed Martin Corp. (NYSE: LMT) CEO Marillyn Hewson said she could see up to $28 billion in new business for Lockheed alone as a result of President Trump’s recent announcement that the Saudis would purchase up to $110 billion in weapons from the United States.
Not to be outdone, Boeing Co.’s (NYSE: BA) CEO Dennis Muilenburg reportedly said Boeing’s share of the Saudi pie could be worth more than $50 billion, including both military and commercial sales. He did not specify the value of the military portion by itself.
A large portion of these estimates are no doubt down to maintenance and sustainment deals that can run for periods as long as 30 years, so don’t expect either company’s revenues to surge over the next quarter or two. In fact, the sustainment part of these kinds of deals typically amounts to 70% of the total value.
Foreign weapons sales take a long to time to negotiate and a long time to deliver. Congress must be notified of a pending deal and that is a potential minefield. If the sale is not stopped there, then the contracts must be drawn up between the manufacturer and the country before manufacturing and delivery begin.
Payments for the hardware typically begin when the contract is signed, followed by a future payment when the actual unit gets to the assembly line, and then the final payment is received when the system is delivered. Then the sustainment payments begin.
In 2012 the Saudis received the okay to acquire 25 C-130 aircraft, some as tankers and some the basic cargo hauler. So far the country has purchased just two, and the rest likely fall under this newly announced deal.
Lockheed’s Hewson told Aerospace Daily that the Saudis are looking for four multimission warships and Lockheed is proposing a variant of its Littoral Combat Ship. Lockheed and a Saudi state company also agreed to form a joint venture to support final assembly and completion of about 150 S-70 Black Hawk utility helicopters. She also said that Lockheed’s THAAD and PAC-3 missile systems may be on the Saudi shopping list.
There has been no report of what Boeing might be selling to Saudi Arabia, but expect to hear something soon.
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