Lockheed Martin Corporation Reports Strong Q1 Results … And Falls

Advertisement

LMT - Lockheed Martin Corporation Reports Strong Q1 Results … And Falls

Source: Praveer Sharma via Flickr

Even though Lockheed Martin Corporation (NYSE:LMT) pulled off a solid quarter, Wall Street wasn’t too enthused. So far today, the shares are off 6.2% to $336.

Although, LMT has still had a pretty good year, with the return at 12%. The performance is in-line with other mega defense contractors like Northrop Grumman Corporation (NYSE:NOC), General Dynamics Corporation (NYSE:GD) and Boeing Co (NYSE:BA).

LMT Reports on a Strong Quarter

OK then, so let’s take a deeper look at the quarter for LMT. Earnings came to $1.16 billion, or $4.02 per share, up from $789 million, or $2.69 per share during the same period a year ago. The Street, on the other hand, was looking for $3.39 per share.

As for the top-line, LMT reported $11.63 billion, up from $11.21 billion. By comparison, the analysts’ consensus called for revenues of $11.24 billion.

LMT also raised its guidance for 2018. The company projects reveues of $50.35 billion to $51.85, up from $50 billion to $51.5 billion. And as for the EPS, LMT has put out the forecast of $15.80 to $16.10 per share, compared to the prior guidance of $15.20 to $15.50 per share.

Here are also some other notable events during the quarter:

  • NASA and the Israel Space Agency announced an agreement with an Israeli startup, called StemRad Ltd., to create vests to prevent radiation exposure. The focus will be for long space missions, such as to Mars — and developed in conjunction with LMT.
  • The Air Force has split a $640 million contract between Space X and LMT/Boeing — in a joint ventured known as the United Launch Alliance — for various satellite launches. The goal is to find the right balance between lower costs and high-quality systems.
  • NASA awarded LMT with a contract to design and build an X-plane – called the Low-Boom Flight Demonstrator – to allow for supersonic passenger travel.
  • LMT finished the foundation for its next generation factory for satellite production. The facility is 266,000 square feet and will include features like an anechoic chamber and a large thermal vacuum chamber. The project is expected to be complete by 2020.
  • LMT started the development of the spaceship — the Orion — that will return astronauts to the moon and begin exploration of Mars.

Lockheed Martin Stock and the F-35

No doubt, when it comes to LMT stock, the main driver is the F-35 (it accounts for close to a quarter of overall revenues). While it has been plagued with problems — like design flaws, delays and cost overruns — there has still been quite a bit of progress. The F-35 combat jet is a 5th generation fighter, which has advanced stealth capabilities, laser-precision targeting, network-enabled operations and an integrated view of the battlefield.

The federal government and LMT are engaged in negotiations. And yes, it is far from clear what will happen. Yet the fact is that there is no viable alternative to the F-35. So in the end, it seems like a good bet that there be a deal put together that will work.

It is also important to keep in mind that LMT has made progress in reducing the costs of the jet. For the past five years, it has gone from $122 million to $95 million per plane.

Bottom Line for LMT Stock

Today’s weakness in LMT stock does look like an opportunity for investors, especially for those with a long-term focus. Keep in mind that the valuation is reasonable, with the forward price-to-earnings multiple of 20X.

More importantly, LMT is one of only a handful of companies that has the scale to participate in major defense contracts. So with the significant increases in the defense budget, the company is likely to benefit from sustainable growth.

After all, the backlog is at a staggering $105 billion, which is roughly twice the amount of the annual revenues.

Tom Taulli is the author of High-Profit IPO StrategiesAll About Commodities and All About Short SellingFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Tom Taulli is the author of various books. They include Artificial Intelligence Basics and the Robotic Process Automation Handbook. His upcoming book is called Generative AI: How ChatGPT and other AI Tools Will Revolutionize Business.


Article printed from InvestorPlace Media, https://investorplace.com/2018/04/lockheed-martin-corporation-lmt-goes-nowhere-on-q1-results/.

©2024 InvestorPlace Media, LLC