| Snowflake Score | |
|---|---|
| Valuation | 3/6 |
| Future Growth | 2/6 |
| Past Performance | 3/6 |
| Financial Health | 4/6 |
| Dividends | 5/6 |
LMT Stock Overview
Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide.
Lockheed Martin Corporation Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$428.85 |
| 52 Week High | US$479.99 |
| 52 Week Low | US$324.23 |
| Beta | 0.67 |
| 1 Month Change | 3.59% |
| 3 Month Change | -1.45% |
| 1 Year Change | 19.21% |
| 3 Year Change | 14.83% |
| 5 Year Change | 42.28% |
| Change since IPO | 1,581.77% |
Recent News & Updates
Lockheed Martin awarded $540.1M Navy contract modification
Lockheed Martin (NYSE:LMT) was awarded a not-to-exceed $524.1M undefinitized modification to a previously awarded fixed-price incentive advanced acquisition contract. The modification increases the ceiling to procure long-lead time materials, parts, components, and effort for the production of seven Lot 15 F-35A aircraft, two Lot 15 F-35B aircraft, seven Lot 16 F-35A, and two Lot 16 F-35B aircraft for the government of Italy. Work is expected to be completed in June 2025. Non-U.S. Department of Defense participant funds in the amount of $524.1Mwill be obligated at the time of award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command is the contracting activity.
Lockheed Martin Update: Still A Solid DGI Choice
Despite a strong 2022 performance, Lockheed Martin stock remains a reasonable choice for conservative dividend growth investors. The 2Q 2022 earnings miss was due to a non-cash charge for an employee pension contract purchase. 2Q operating EPS and the full-year outlook are unchanged. The U.S. government F-35 aircraft contract is in the process of being amended to address inflation and supply chain issues. On balance, fundamentals are strong; however, Lockheed stock now appears to be trading around Fair Value. Long-term investors may consider starting a small position and accumulating additional shares upon pricing weakness. I last wrote you about Lockheed Martin Corp (LMT) in October 2021. At the time, I had just initiated a new position in LMT. This article is an update. My original contribution, "Lockheed Martin: Why It's Become a New Position in My Portfolio," may be found here. Investment Thesis My investment thesis for owning LMT shares hasn't changed much: Lockheed Martin stock likely remains a solid investment for long-term investors seeking both growing income and capital appreciation. The business is well-managed, owns a strong franchise, possesses a sound balance sheet, earns its profits in cash, and is shareholder-friendly. Using routine valuation methodologies, shares appear fairly valued. Currently, shares do not appear to be trading at a significant discount or premium. Over the past decade, Lockheed has, on average, grown operating earnings and operating cash flow by low double-digits a year. Historically, the business tends to be recession resistant. LMT investors have enjoyed dividend increases for 20 consecutive years. Today, the stock yields ~2.6 percent. In recent years, the payout has risen over 9 percent annually, and the current yield is higher than other large Aerospace and Defense stocks. Business Update Since I first initiated a position, Lockheed management reported earnings four times. While I track a number of financial and operational metrics, I've listed several specifics below that I believe LMT investors may find especially helpful when seeking to evaluate management performance: Revenue Segment Operating Margin Free Cash Flow Return-on-Invested-Capital Let's break these down one-by-one. Revenue Over the past four quarters, revenue averaged about $16 billion. For the full year 2022, management guides to $65.3 billion. Doing some arithmetic indicates management expects top-line acceleration during the second half of this year. That's a positive. Nonetheless, presuming management meets its forecast, full-year 2022 sales will be down slightly from 2021. During the 2Q earnings call, management explained the soft revenue is a result of supply-chain disruptions, inflation, and customer delays. Lockheed Martin 2Q 2022 earnings presentation Additional Detail: F-35 Aircraft Program Delay The F-35 aircraft program (Lots 15 to17) is really the core issue affecting 2022 sales. It's integral to the 2Q 2022 earnings “miss” and revised full-year guidance. Lockheed had been authorized to begin production work on Lots 15 to 17, but the company’s costs began to exceed the contract value and available funding in the second quarter of 2022. As a result, F-35 program sales and cash flow became impaired. In addition, the company had approximately $1 billion in potential termination liability exposure to third parties related to Lots 15 to 17. Recently, the company reached an agreement in principle with the U.S. Government on an amended F-35 Lots 15 to 17 production contract. There is not yet a definitive agreement. Lockheed Martin expects to recover certain sales and costs incurred upon receiving revised contractual authorization and funding on the F-35 production contract. Such contractual authorization is expected to occur sometime during the third quarter of 2022. However, until a final agreement is reached, or the U.S. Government otherwise provides additional contractual authorization and funding, the company’s financial results will continue to be negatively impacted. Such impact may be material. As part of the LRIP Lots 15-17 production contract, the U.S. Government reduced the acquisition quantities based on budget availability. While the company expects the LRIP Lots 15-17 contract to support its long-term objective to produce 156 aircraft a year, COVID-19 and other impacts experienced by the F-35 enterprise have required it to modify its near-term production plan. I believe Lockheed will resolve its F-35 contract issue successfully. If so, current events are likely to fade into the positive, long-term prognosis for the company. Segment Operating Margin Lockheed Martin reports Segment Operating Margins for each of its four segments: Aerospace, Missiles/Fire Control, Rotary and Mission Systems, and Space. Nomenclature non withstanding, Segment Operating Margin is simply Lockheed management's way to express EBIT margins after excluding unallocated /corporate items. Over the past few years, Lockheed consolidated Segment Operating Margins were reported as follows: 2019: 10.6 percent 2020: 10.8 percent 2021: 11.0 percent Despite an outlook for a year-over-year 2.6 percent sales decline, management still guides 2022 segment margins to be 11.0 percent. Through the first half of the year, Segment Operating Margin was 11.0 percent. Free Cash Flow When current CEO Jim Taiclet took the new role, he stated Lockheed Martin would run for cash. Front and center, management reports cash flow and free cash flow clearly. For the full-year 2021, Lockheed recorded $6.03 billion free cash flow: or ~$22 per share. This compared favorably with FY $22.48 EPS. It demonstrates Lockheed earns its profits in cash. Current 2022 FCF guidance calls out ~$6 billion, on par with last year. Lockheed Martin 2Q 2022 earnings presentation At mid-year, Lockheed reported $2.74 billion free cash flow. FY 2022 cash flow is tracked for success. Return-on-Invested-Capital Return-on-Invested Capital can be a useful tool to help evaluate management effectiveness. There are several ways to calculate the metric. Generally, I utilize a simple formula seeking to obtain a conservative perspective: RoIC = EBIT / Total Assets less Current Liabilities less Cash This is “kitchen sink” approach; but it serves its purpose. RoIC is best considered when compared to a company's WACC and benchmarked against similarly situated peers. For FY 2021, utilizing the aforementioned RoIC methodology, Lockheed Martin registered 28% return-on-invested-capital. This compares reasonably well with the more recent 2022 six-month 23% RoIC. Currently, Lockheed Martin has ~6% WACC. Please find below a table comparing LMT's half-year RoIC with several peers: Lockheed Martin Corp -- Return on Invested Capital versus Peers 1H 2022 RoIC Lockheed Martin 23% Raytheon (RTX) 4% Northrop Grumman (NOC) 12% General Dynamics (GD) 11% L3Harris Technologies (LHX) 7% Underlying data found on investor websites and calculated by author Lockheed Martin has a higher RoIC than peers and covers its WACC easily. This indicates management is creating shareholder value. Indeed, the average return-on-invested-capital for the Aerospace & Defense industry is about 7 percent. LMT returns are among the top industry performers. See the chart from fidelity.com below. Fidelity.com Note that Lockheed's listed RoI is 21 percent versus the 23 percent I calculated in the table above. This is not at issue. First, Fidelity Investments is computing RoI over 12 months versus my 6-month time frame. Second, as noted earlier, the formula for RoI can vary; Fidelity Investments may not utilize precisely the same formula I expressed. Other Important Observations Order Backlog In conjunction with the 2Q earnings release, management communicated Lockheed had a $135 billion backlog. This is on par with the mid-year 2021 backlog. It also totaled $135 billion. Management indicated they expected the backlog to increase by the end of this year. The "Four Growth Pillars" Despite 2022 shaping up to be a bit of a down year, management remains constructive on the future. They expect the company to resume earnings growth in 2023. Lockheed's “four pillars” remain intact. These include growing: Programs of record Classified activities Hypersonics New business awards Employee Pension Contract Purchased In June 2022, the company purchased group annuity contracts to transfer $4.3 billion of gross defined benefit pension obligations and related plan assets to an insurance company. The group annuity contracts were purchased using assets from Lockheed Martin’s master retirement trust and no additional funding contribution was required. In connection with this transaction, the company recognized a noncash, non-operating settlement charge of $1.5 billion (or $4.33 per share, after-tax). When the company reported 2Q 2022 earnings, the accounting loss startled some investors. Reading past the headlines, the aforementioned explained what appeared to be big EPS “miss,” and apparent reduction in full-year guidance. Actually, management didn't reduce the underlying operating earnings. Stock Valuation When I last wrote you, LMT stock traded around $350 to $360 a share. Lockheed common appeared to be an undervalued security. Since then, shares have appreciated about 20 percent sans dividends. Currently, the stock no longer appears to be in the bargain bin. A recent bid is close to my current $430 to $440 Fair Value Estimate.
Lockheed Martin's (NYSE:LMT) Soft Earnings Don't Show The Whole Picture
Lockheed Martin Corporation's ( NYSE:LMT ) recent soft profit numbers didn't appear to worry shareholders. We think...
Lockheed Martin nabs $213M undefinitized contract for F-35 air vehicles
Lockheed Martin (NYSE:LMT), a Lockheed Martin Aeronautics, received a not-to-exceed $213.3M cost-plus-incentive-fee undefinitized contract. This contract provides engineering, maintenance, logistics, and material support, in support of Phase 2 upgrade of the Australia Canada United Kingdom Reprogramming Laboratory for the F-35 Joint Strike Fighter program. This contract also provides a new mission data production and test line to support sovereign reprogramming capabilities for the government of Australia and the United Kingdom's F-35 air vehicles. Work is expected to be completed in July 2027.
Shareholder Returns
| LMT | US Aerospace & Defense | US Market | |
|---|---|---|---|
| 7D | 0.2% | 0.3% | 1.3% |
| 1Y | 19.2% | 6.1% | -11.7% |
Return vs Industry: LMT exceeded the US Aerospace & Defense industry which returned 5.5% over the past year.
Return vs Market: LMT exceeded the US Market which returned -11.6% over the past year.
Price Volatility
| LMT volatility | |
|---|---|
| LMT Average Weekly Movement | 3.5% |
| Aerospace & Defense Industry Average Movement | 6.6% |
| Market Average Movement | 7.8% |
| 10% most volatile stocks in US Market | 16.9% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: LMT is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.
Volatility Over Time: LMT's weekly volatility (3%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1912 | 114,000 | Jim Taiclet | https://www.lockheedmartin.com |
Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It operates through four segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. The Aeronautics segment offers combat and air mobility aircraft, unmanned air vehicles, and related technologies.
Lockheed Martin Corporation Fundamentals Summary
| LMT fundamental statistics | |
|---|---|
| Market Cap | US$113.71b |
| Earnings (TTM) | US$4.71b |
| Revenue (TTM) | US$64.17b |
24.2x
P/E Ratio1.8x
P/S RatioIs LMT overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| LMT income statement (TTM) | |
|---|---|
| Revenue | US$64.17b |
| Cost of Revenue | US$55.58b |
| Gross Profit | US$8.59b |
| Other Expenses | US$3.88b |
| Earnings | US$4.71b |
Last Reported Earnings
Jun 26, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | 17.74 |
| Gross Margin | 13.39% |
| Net Profit Margin | 7.33% |
| Debt/Equity Ratio | 101.9% |
How did LMT perform over the long term?
See historical performance and comparisonDividends
2.6%
Current Dividend Yield63%
Payout RatioDoes LMT pay a reliable dividends?
See LMT dividend history and benchmarks| Lockheed Martin dividend dates | |
|---|---|
| Ex Dividend Date | Aug 31 2022 |
| Dividend Pay Date | Sep 23 2022 |
| Days until Ex dividend | 18 days |
| Days until Dividend pay date | 41 days |
Does LMT pay a reliable dividends?
See LMT dividend history and benchmarks