What Nobias says about Lockheed Martin (LMT) stock
Key Points
Lockheed Martin posted Q3 results this week, beating Wall Street estimates on the bottom-line.
LMT shares are up more than 28% on a year-to-date basis, outperforming the S&P 500, which is down nearly 22% during 2022 by a wide margin.
The credible analysts that Nobias tracks see total return potential of nearly 10% from the stock’s current share price.
Performance
Event & Impact
Nobias insights
2022 has been a tough year for investors with the S&P 500 falling by 21.7% on a year-to-date basis. However, defense stocks have offered investors rare shelter from the negative sentiment surrounding markets, with many of the hailing from that area of the economy posting positive returns during 2022 thus far.
Lockheed Martin (LMT) is the largest U.S. defense contractor. Lockheed posted Q3 earnings this week, which sent shares soaring. LMT shares rallied 15.02% this week alone, bringing their year-to-date gains up to 28.29%. And yet, even after this strong relative outperformance, the credible authors and analysts that the Nobias algorithm tracks remain overwhelmingly bullish on LMT shares.
LMT Oct 2022
Bullish Nobias credible authors:
Cal Biesecker, a Nobias 5-star rated author, broke down the company’s recent Q3 results in an article published at Defense Daily. Biesecker said, “Lockheed Martin on Tuesday reported higher sales in its third quarter due primarily to its work on the F-35 and air and missile defense programs while earnings tripled from a year ago when pension costs led to more than $1 billion in charges.” He continued, “Net income of $1.8 billion, $6.71 earnings per share (EPS), beat consensus estimates by 14 cents a share. A year ago, net income was $614 million ($2.21 EPS).”
Looking at the top-line, Biesecker wrote, “Sales in the quarter increased 3 percent to $16.6 billion from $16 billion a year ago.” He continued, “Sales drivers in the quarter included the F-35 fighter program, which benefited from a contract for Lot 15 aircraft in August, the Next Generation Interceptor missile defense development program, classified programs in the Aeronautics segment, and the Patriot Advanced Capability-3 (PAC-3) integrated air and missile defense program.”
Biesecker highlighted the company’s capital return program, stating, “The company also announced a $14 billion multi-year share repurchase program that includes $4 billion in accelerated share repurchases in the fourth quarter that will bring total stock buybacks to $8 billion in 2022, double earlier plans.”
Biesecker noted that during the company’s earnings report, Jay Malave, the company’s chief financial officer, said that “The company expects to repurchase about 10 percent of its outstanding shares over the next few years as it delivers long-term value to shareholders”.
Looking ahead, Biesecker noted that Lockheed’s outlook for 2022 “remains intact after the company in the second quarter lowered its revenue guidance to around $6.3 billion and earnings to around $21.55 EPS.” He said that the company’s “Backlog at the end of the quarter stood at $139.7 billion, up 3 percent from $135.4 billion at the end of 2021.”
Biesecker also put a spotlight on “upside opportunities” that management highlighted looking out to 2024 regarding “programs that are getting a lot of attention in Ukraine’s war, including the HIMARS multiple rocket launcher, Javelin anti-tank guided missile, and the Guided Multiple Launch Rocket System surface-to-surface missiles, and some others”.
Gen Alpha, another Nobias 5-star rated author, also recently published an article on Lockheed Martin at Seeking Alpha. Gen Alpha highlighted Lockheed’s overall operations, stating, “Lockheed Martin is a global defense company that's strategically headquartered in Bethesda, Maryland, sitting just north of Washington D.C. It has a leadership position in high-end military aircraft, including the signature F-35 fighter jet program. Beyond fighter aircraft, LMT's other businesses include mission systems, including Sikorsky helicopters, missile defense, and space systems. Over the trailing 12 months, LMT generated $64 billion in total revenue.”
The author touched upon macro tailwinds for the stock, writing, “Moreover, defense spending is set to continue growing, given the ongoing Russian-Ukraine war, in which the U.S. and partners have been placed on heightened alert and have supplied critical arms.”
Looking at recent defense budgets passed by United States legislators, Gen Alpha said, “This is reflected by the recently proposed 9%, $37 billion, increase in defense spending for fiscal 2023 by the House Armed Services Committee with strong bipartisan support.”
Gen Alpha also touched upon Lockheed’s strong shareholder returns. They said, “LMT sports a strong A- rated balance sheet and it recently raised its dividend by 7% to $3 per share. This brings LMT's dividend yield to 3%, and the dividend is well protected by a low 45% payout ratio based on forward EPS of $26.74.” The author continued, “Notably, LMT has a robust 5-year dividend CAGR of 9%.”
Gen Alpha concluded, “LMT has seen some near-term challenges, but I believe they are transitory in nature. Plus, it's set to benefit from increased defense spending domestically and abroad. Given LMT's strong competitive advantages, excellent growth prospects and reasonable valuation, I believe the stock is a compelling buy for long-term growth investors seeking both capital appreciation and income.”
Passive Income Pursuit, a Nobias 4-star rated author, also touched upon Lockheed Martin’s recent dividend increase in a report that they published at their website. They wrote, “On September 30th the Board of Directors at Lockheed Martin (LMT) approved an increase in the quarterly dividend payment. The dividend was increased from $2.80 to $3.00 which is a solid 7.1% increase.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Passive Income Pursuit continued, “The new dividend will be payable December 30th to shareholders of record as of December 1st.” They said, “Lockheed Martin is a Dividend Contender with 20 consecutive years of dividend growth.”
Looking at dividend growth consistency, the author stated, “Although there is a dividend cut in 2000 when the dividend was cut by 50%. Lockheed Martin resumed dividend growth in 2003 and has been raising it every year since.”
Passive Income Pursuit also touched upon Lockheed’s valuation, writing, “I consider the fair value range based on dividend yield theory to be the 3-year moving average yield +/- 10%. That gives a fair value range of $398 - $488 and suggests that shares are currently trading below the low end of fair value.”
Overall bias of Nobias Credible Analysts and Bloggers:
Even after LMT’s 15%+ rally this week, the majority of credible authors and all of the credible Wall Street analysts that the Nobias algorithm tracks are bullish on shares. 80% of recent articles published by credible authors on LMT have expressed a “Bullish” bias. All three of the credible analysts that have offered opinions on LMT shares believe that the stock is headed higher. Right now, the average price target being placed on LMT by those credible analysts is $486.33. Lockheed closed the week trading at $454.61. Therefore, relative to that average price target, Lockheed shares offer investors upside potential of approximately approximately 7% (plus the stock’s current 2.64% dividend yield).
Disclosure: Nicholas Ward is long LMT. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
Additional disclosure: All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of any specific person.
Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.