Ross Wilkers

COMPANY OUTLOOK

How these 2 defense platform giants are thinking about the future of work

Even the biggest of the big blue chip defense companies have the future of work on their agendas for a world when the coronavirus is no longer a pandemic and global emergency.

During their fourth quarter earnings calls with investors Tuesday, executives at Lockheed Martin and Raytheon Technologies said their companies are looking at their real estate footprints for potential savings given the numbers of employees working at home today.

Lockheed ended last year with 72 million square feet of space in its purview. That includes the space Lockheed owns, space the company leases, and space the government owns and company employees work at.

The pending acquisition of Aerojet Rocketdyne slated to close later this year will add about 3 million square feet, Lockheed Chief Financial Officer Ken Possenriede told analysts.

But by the same token, Possenriede said Lockheed is rolling out a new plan for its future work dynamic that could see “at least a couple million square feet… if not more” of leased space be reduced over the coming years.

“Now the opportunity comes: right now we have roughly half of our employees working remotely, some of them are periodically coming in,” Possenriede said. “We’ll go to more hoteling, we’ll allow people where it makes sense for them to work from home, and we’ll make sure this is a strategic competitive advantage for us.”

Lockheed is currently slated to be down roughly one-half million square feet when factoring in the U.K. government’s pending takeover of an atomic weapons program (which Lockheed supports through a joint venture) there that covers 4.5 million square feet.

One million square feet is being added through expansions of several facilities, then there is the 3 million that Aerojet Rocketdyne will add.

Raytheon Technologies has certainly been thinking along the same lines for its commercial aerospace business given what has happened to global air travel amid the COVID-19 pandemic.

That thinking is now apparently extending into Raytheon’s defense businesses that has largely been insulated from the economic turmoil. During that company’s call with analysts, Chief Financial Officer Toby O’Brien said Raytheon is eyeing an office footprint cut by “up to 25 percent over the next several years.”

For this year alone, O’Briren said Raytheon expects to reduce the office footprint by 1.6 million square feet.

Raytheon’s intelligence and space segment alone will by mid-2025 bring down its manufacturing space by 280,000 square feet and aims for “savings of $160 million over a 10-year period,” O’Brien said.

A second point of analyst inquiry on Tuesday was how each company sees this year playing out for them on the financial front. Raytheon has held off on giving a detailed outlook during the pandemic but came ready to give a glimpse at this year, though with much uncertainty baked in.

The revenue range is $63.4 billion-to-$65.4 billion, which would suggest somewhere between flattish and 3-percent top line growth when adjusting for the April 2020 merger to create today’s Raytheon Technologies.

O’Brien noted that range and others Raytheon gave regarding the bottom line are “a bit wider than we would typically provide, driven entirely by the macro factors impacting our commercial aero businesses.”

Both defense segment’s are seen as growing in the low-to-mid single digits this year. One commercial aerospace segment is expected to be “down high to low-single” digit, while the other is forecasted as “flat to up mid-single.” Much of the commercial outlook depends on the vaccine rollout, passenger traffic and customer behavior.

Lockheed’s top line outlook for this year appears more straight-forward by comparison: revenue at $67.1 billion-to-$68.5 billion to imply growth of nearly 4 percent.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.

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