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LMT Earnings Watch: Is Lockheed Martin a Strong Buy in 2024?

Defense major Lockheed Martin (LMT) will release its fourth-quarter results on January 23. Analysts expect its earnings and revenue to decline year-over-year. The defense sector is currently experiencing tailwinds due to the rise in geopolitical conflicts and increasing defense budgets. So, despite the potential decline in earnings and revenue, is it worth investing in LMT this year? Read on to learn my view…

Lockheed Martin Corporation (LMT) is scheduled to report its fourth-quarter results on January 23. Wall Street expects the defense major’s EPS and revenue to decline year-over-year. With escalating geopolitical tensions around the world, I have discussed why it could be wise to buy the stock now despite the potential decline in earnings and revenue.

For the fourth quarter, LMT’s EPS and revenue are expected to decline 6.9% and 5.5% year-over-year to $7.25 and $17.95 billion, respectively. However, the company has a solid earnings history, having beaten the consensus estimates in each of the trailing four quarters.

In the previous quarter, the company delivered one F-16, seven C-130J, and thirty F-35 aircraft. It also delivered three government helicopters, three commercial helicopters, and one international military helicopter.

For nine months ended September 24, 2023, F-35 deliveries stood at 80 and F-16 and C-130J deliveries came in at two and 13, respectively. Meanwhile, government and commercial helicopter deliveries amounted to 24 and four, respectively.

During the previous quarter, LMT had reaffirmed its fiscal 2023 outlook, expecting net sales to range between $66.25 billion and $66.75 billion. Its business segment operating profit is forecasted to range between $7.33 billion and $7.38 billion. Also, its EPS is expected to come between $27 and $27.20. In addition, its free cash flow is expected to be higher than or equal to $6.20 billion.

After the third-quarter results announcement, LMT’s Chairman, President, and CEO Jim Taiclet said, “Our order backlog remains robust at $156 billion as both domestic and international orders were strong. Moreover, our 21st Century Security strategy is resulting in new business successes, including the award of the transformational AIR6500 integrated air and missile defense program by the Australian Defence Force, which will serve as a blueprint for future joint all-domain operations worldwide.”

Taiclet continued by saying, “Looking ahead, we’ll continue to pursue our strategy of building capacity, efficiency, and resilience into our production operations, driving advanced digital technologies to enhance integrated deterrence through collaboration with our customers and tech and aerospace industry partners, and expanding our international business and operations.”

“This strategy is designed to drive growth in our traditional platforms and systems, augmented with digital service revenues over time, which in turn will support our dynamic capital allocation process to reward shareholders,” he added.

On November 14, 2023, LMT announced the opening of a $16.50 million engineering facility at its Huntsville campus, thereby expanding its presence in Huntsville. The facility is called Missile System Integration Lab (MSIL), where LMT will conduct development, testing, and system integration of the United States’ next long-range ballistic missile defense interceptor – the Next Generation Interceptor (NGI) for the U.S. Missile Defense Agency (MDA).

During the fourth quarter, LMT announced the delivery of the first Precision Strike Missiles (PrSM) to the U.S. Army, providing long-range precision fire capability and helping achieve modernization for long-range deterrent capability. On October 31, 2023, Switzerland formalized an agreement to purchase the company’s Patriot Advanced Capability-3 (PAC-3) Missile Segment Enhancement (MSE) missiles and related support equipment.

During the same month, The Republic of the Philippines Department of National Defense announced the acquisition of three new C-130J-30 Super Hercules tactical airlifters through a Direct Commercial Sale.

LMT’s stock has gained 2.2% over the past month and 4.2% over the past year to close the last trading session at $457.76.

Here’s what you might want to consider ahead of its upcoming earnings release:

Mixed Financials

LMT’s net sales for the third quarter ended September 24, 2023, increased 1.8% year-over-year to $16.88 billion. The company’s sales from its Rotary and Mission Systems rose 9% year-over-year to $4.12 billion.

Its non-GAAP net earnings declined 7% over the prior-year quarter to $1.70 billion. Also, its non-GAAP EPS came in at $6.77, representing a decline of 1.5% year-over-year. In addition, its cash from operations declined 7.7% year-over-year to $2.89 billion.

Mixed Analyst Estimates

Analysts expect LMT’s revenue for fiscal 2023 and 2024 to increase 1% and 3% year-over-year to $66.63 billion and $68.62 billion, respectively. On the other hand, its EPS for fiscal 2023 and 2024 are expected to decline 0.1% and 2.7% year-over-year to $27.19 and $26.46, respectively.

Mixed Valuation

In terms of forward non-GAAP P/E, LMT’s 16.83x is 9.1% lower than the 18.52x industry average. Its 14.95x forward EV/EBIT is 8.4% lower than the 16.32x industry average.

On the other hand, in terms of forward EV/EBITDA, LMT’s 12.86x is 11.5% higher than the 11.54x industry average. Likewise, its 1.91x forward EV/Sales is 8.2% higher than the 1.77x industry average. Its 1.70x forward Price/Sales is 20.7% higher than the 1.41x industry average.

High Profitability

In terms of the trailing-12-month net income margin, LMT’s 10.29% is 67.6% higher than the 6.14% industry average. Likewise, its 15.16% trailing-12-month EBITDA margin is 11.2% higher than the industry average of 13.64%. Furthermore, the stock’s 1.25x trailing-12-month asset turnover ratio is 53.7% higher than the industry average of 0.81x.

POWR Ratings Show Promise

LMT has an overall B rating, equating to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. LMT has a B grade for Quality, consistent with its high profitability. It has a B grade for Stability, in sync with its 0.51 beta.

LMT’s stock is trading above its 50-day and 200-day moving averages, justifying its B grade for Momentum.

LMT is ranked #9 out of 73 stocks in the Air/Defense Services industry. Click here to access LMT’s Growth, Value, and Sentiment ratings.

Bottom Line

LMT’s stock is trading above its 50-day and 200-day moving averages of $450.10 and $450.51, respectively, indicating an uptrend. Currently, LMT is benefitting from the tailwinds in the defense sector, driven by the escalation of geopolitical tensions worldwide and the increase in defense budgets by various governments to enhance their military capabilities.

Given the tailwinds around the defense sector and LMT’s high profitability, it could be wise to buy the stock now.

How Does Lockheed Martin Corporation (LMT) Stack Up Against Its Peers?

While LMT has an overall grade of B, equating to a Buy rating, you may also check out these other A (Strong Buy) or B (Buy)-rated stocks within the Air/Defense Services industry: Willis Lease Finance Corporation (WLFC), Cadre Holdings, Inc. (CDRE), and Woodward, Inc. (WWD). To explore more Air/Defense Services stocks, click here.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >

LMT shares rose $0.38 (+0.08%) in premarket trading Monday. Year-to-date, LMT has gained 1.08%, versus a 1.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.


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