Thursday, June 28, 2018 1:55:09 AM
June 21, 2018, 11:10:44 AM EDT By Tom Taulli, InvestorPlace Media
Since April, Lockheed Martin (NYSE: LMT ) stock has been under pressure. Yet the company is not alone. Keep in mind that the defense industry has essentially gone out of favor, as seen with the weakness in operators like Northrop Grumman (NYSE: NOC ), Raytheon Company (NYSE: RTN ) and General Dynamics Corporation (NYSE: GD ).
There are certainly reasons for this. President Trump's summit with North Korean leader Kim Jong Un has resulted in a thawing of relations. One of the notable moves was to cancel joint U.S.-South Korean military exercises. It also looks like Kim is interested in moving toward denuclearization.
But there is another issue that has weighed on LMT stock: the fears of a global trade war. Consider that the company is looking to grow its business by selling its wares in foreign markets. But unfortunately, there are signs that Europe may start to pull back on military expenditures from U.S.-based firms in retaliation to Trump's moves.
Granted, such factors are serious - and difficult to gauge. But I still think there are other key trends that should help overcome these problems, making LMT stock an interesting opportunity.
So let's take a look:
LMT Stock Advantage No. 1 -
The F-35. When looking at the long-term growth of LMT stock, the main driver is the F-35 Joint Strike Fighter.
It's true that the process has been long and arduous. And there will likely be continued issues. But this is to be expected with any complex piece of technology. The F-35 is a fifth-generation fighter that has advanced stealth, network-enabled operations and laser-precision targeting. There are also three versions, which deal with different types of runways and engagements.
Yet the recent Pentagon budget shows that the F-35 will be highly strategic. Consider that there was an appropriation for 20 more jets.
But this just scratches the surface. Some estimates are that the Pentagon will purchase as many as 2,400 of these jets in the coming years.
LMT Stock Advantage No. 2 -
Diverse Platform. While the F-35 will represent a large portion of the business for LMT, this does not mean the revenues will be overconcentrated. The fact is that the company has other major segments.
There is Missiles and Fire Control, which posted a 14% increase in revenues to $7.2 billion last year. This segment includes some of the most important parts of national security like missile defense (such as the Patriot Advanced Capability-3 and Terminal High Altitude Area Defense programs), tactical missiles and air-to-ground precision strike weapon systems.
Next, there are Rotary and Mission Systems, which has been growing particularly strong. In 2017, revenues jumped by 28% to $14.2 billion. This business includes such things as helicopters (like Black Hawks and Seahawks), ships and submarines. There is also a capability for cybersecurity.
Finally, there is the Space program, which logged a 19% increase in sales last year to $9.5 billion. Some of the programs include the Trident II D5 Fleet Ballistic Missile (for submarines) and Orion, which is a spacecraft for NASA.
LMT Stock Advantage No. 3 -
Valuation. LMT is definitely shareholder-friendly. During the latest quarter, the company returned nearly $900 million to stockholders. This included a blend of dividend distributions and buybacks of LMT stock - the current yield is 2.6%.
The valuation is also reasonable, with the forward price-to-earnings multiple at 16.5X. This does look like a good value in terms of the long-term growth prospects and the strong barriers to entry.
And yes, Wall Street agrees. Keep in mind that the average price target $372, which implies potential upside of 22% or so.
Recent LMT News
- Lockheed Martin Awarded GeoXO Lightning Mapper Contract to Support Forecasters with Severe Weather Monitoring • PR Newswire (US) • 09/18/2024 03:02:00 PM
- Lockheed Martin and Tata Advanced Systems Announce Agreement to Expand C-130J Super Hercules Opportunities in India • PR Newswire (US) • 09/10/2024 07:12:00 AM
- Lockheed Martin Welcomes Egypt to the C-130J Super Hercules Fleet • PR Newswire (US) • 09/05/2024 02:15:00 PM
- Lockheed Martin Chairman, President and CEO and CFO to Speak at the Morgan Stanley Conference • PR Newswire (US) • 09/05/2024 01:00:00 PM
- Intuitive Machines Soars 18% on NASA Contract, Intel Considers Splitting Operations, Dell Reassesses Selling SecureWorks • IH Market News • 08/30/2024 10:00:08 AM
- Poland and Lockheed Martin Celebrate Debut of Poland's First F-35A "Husarz" • PR Newswire (US) • 08/28/2024 03:36:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 08/27/2024 01:50:03 AM
- FuboTV Soars 12% After Venu Sports Block, Goldman Sachs Lowers U.S. Recession Odds, BHP Ends Chile Strike • IH Market News • 08/19/2024 09:28:19 AM
- Form SC 13D/A - General Statement of Acquisition of Beneficial Ownership: [Amend] • Edgar (US Regulatory) • 08/17/2024 12:09:12 AM
- Deutsche Bank Faces Shareholder Backlash, Bank of America Sponsors 2026 World Cup, Quanterix CEO Buys More Shares • IH Market News • 08/16/2024 10:03:21 AM
- Rowley Law PLLC is Investigating Proposed Acquisition of Terran Orbital • PR Newswire (US) • 08/15/2024 10:51:00 PM
- Lockheed Martin to Acquire Terran Orbital • PR Newswire (US) • 08/15/2024 12:39:00 PM
- UBS Beats Earnings Forecasts, Intel Divests Arm Holdings, Flutter Surges 9% in Premarket Trading, and More • IH Market News • 08/14/2024 09:56:35 AM
- Global Super Hercules Fleet Grows with Delivery of First C-130J to New Zealand • PR Newswire (US) • 08/09/2024 01:00:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/05/2024 08:13:03 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 08/01/2024 08:07:22 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/25/2024 11:50:54 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 07/24/2024 08:14:04 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 07/23/2024 08:14:20 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 07/23/2024 11:31:54 AM
- Lockheed Martin Reports Second Quarter 2024 Financial Results • PR Newswire (US) • 07/23/2024 11:29:00 AM
- U.S. Index Futures Dip Slightly as Investors Await Major Earnings Reports, Oil Prices Edge Up • IH Market News • 07/23/2024 10:04:07 AM
- SAP Shares Surge 6%, NXP Declines 8% on Lower-than-Expected Profits, and More Earnings Highlights • IH Market News • 07/23/2024 10:02:34 AM
- Lockheed Martin’s Skunk Works® and KX Shaping the Future of Open Mission System Architectures • Business Wire • 07/23/2024 08:00:00 AM
- Worldwide C-130J Super Hercules Fleet Soars Past 3 Million Flight Hours • PR Newswire (US) • 07/22/2024 11:00:00 AM
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