European debt crisis could affect U.S. contractors

Jeremy Hobson: We’re going to get earnings this morning from several of the big players in the defense industry here in this country — Boeing, Lockheed Martin and Northrop Grumman.

And as Marketplace’s David Gura Reports, all of them are worried about the effects of the European debt crisis.

David Gura: U.S. defense contractors still sell most of their weapons to one customer: the U.S. of A. But Michael Lewis with Lazard Capital Markets says they’d also planned for belt tightening in Washington.

Michael Lewis: What we’re witnessing is a diversification of the revenue streams.

Yair Reiner, an analyst at Oppenheimer, says that paid off.

Yair Reiner: They typically get 15 to 20, sometimes 25 percent of their revenue from customers in Europe and through the Middle East.

But European demand decreased when those countries left Afghanistan and Iraq. And now, one country at the center of the European debt crisis is in no position to keep buying. Richard Aboulafia is with the Teal Group.

Richard Aboulafia: Greece has a very significant military — and people were counting on export sales.

No longer. Lockheed Martin used to sell planes to Greece; now it is banking on the Middle East. But that may have its pitfalls too. If Iraq’s looking for a good deal on some F-16s, it may be able to get a sweetheart deal on some used ones from Athens.

In Washington, I’m David Gura for Marketplace.