Case Study: Lockheed Martin (LMT) stock according to high performing analysts
Key Points
Performance
Lockheed Martin shares fell by 1.42% this week, pushing their year-to-date gains down to 1.05%. This compares poorly to the S&P 500’s year-to-date returns. Thus far in 2023, the S&P 500 has posted gains of 8.09%.
Event & Impact
Lockheed Martin posted its first quarter results this week, beating Wall Street’s expectations on both the top and bottom lines. During Q1, LMT’s revenue totaled $15.1 billion, missing Wall Street’s consensus estimate by $90 million. Lockheed’s Q1 non-GAAP earnings-per-share came in at $6.43, beating the consensus estimate by $0.37/share.
Noteworthy News:
During Q1 Lockheed continued to improve upon the supply chain headwinds that the company has experienced since the COVID-19 pandemic began. The company posted low single digit sales growth and reaffirmed full-year guidance, which calls for flat top-line growth. Management highlighted the company’s $145 billion sales backlog going forward.
Nobias Insights
65% of recent articles published by credible authors focused on LMT shares offer a “bullish” bias. Three out of the six credible Wall Street analysts who cover Lockheed Martin believe that shares are likely to rise in value. The average price target being applied to LMT by these credible analysts is $480.67, which is essentially in-line with the stock’s current share price of $482.55.
Bullish Take Harrison Miller, a Nobias 4-star rated author, said, “Shares are holding above their 50-day and 200-day moving averages and reclaimed their 10-day line Tuesday. The current buy zone for the pattern extends to 524.”
Bearish Take Nobias 4-star rated analyst, Noah Poponak, said, ”The U.S. defense budget has grown significantly to an all-time high level, and with a large level of cumulative government debt, focus on slowing spending growth or reducing it outright could return in 2023.”
LMT Apr 2023
Lockheed Martin, the world’s largest defense contractor, posted its first quarter earnings this week. After beating Wall Street’s estimates on the top and bottom lines, LMT shares hit new 52-week highs of $508.10 on Tuesday.
However, the market’s enthusiasm wore off throughout the remainder of the week, and LMT shares ultimately closed at $482.55. This price is in-line with the average price target that is currently being associated with shares by the credible Wall Street analysts that Nobias tracks.
Bullish Nobias Credible Analysts Opinions:
However, the credible author community is more bullish with 65% of recent reports expressing bullish sentiment. Ahmed Farhath, a Nobias 4-star rated author, posted a pre-earnings breakdown of what the market was expecting from Lockheed Martin coming into the stock’s Q1 report at Seeking Alpha this week.
Farhath wrote, “The consensus EPS Estimate is $6.06 and the consensus Revenue Estimate is $15.01B (+0.3% Y/Y).” “Over the last 1 year,” he continued, “LMT has beaten EPS estimates 75% of the time and has beaten revenue estimates 25% of the time.”
Looking at Wall Street’s sentiment gauge coming into the quarter, Farhath said, “Over the last 3 months, EPS estimates have seen four upward revisions and 1 downward. Revenue estimates have seen 1 upward revision and 4 downward.”
Harrison Miller, a Nobias 4-star rated author, covered Lockheed’s Q1 report in an article that he published at Investors.com this week. Looking at the macro-environment surrounding this defense stock, Miller highlighted the Russia/Ukraine war as a tailwind for the company.
Regarding Lockheed he said, “The maker of the F-22 and F-35 fighter jets has been a heavy supplier of missiles and other military equipment in Ukraine's fight against Russia's invasion over the past year.” “Lockheed Martin provided High Mobility Artillery Rocket Systems (HMARS) and ammunition, Javelin and Stinger missiles early in the assault,” he added.
Moving onto Lockheed’s Q1 results, Miller wrote, “Lockheed Martin reported adjusted earnings of $6.43 per share, unchanged from last year. GAAP earnings, excluding mark-to-market investment gains, rose 2.6% to $6.61 per share.” “Net sales ticked up to $15.126 billion from $14.96 billion,” he added. Both of these figures came in ahead of Wall Street consensus estimates.
Lockheed Martin beat consensus top-line estimates by $90 million and it beat consensus earnings-per-share estimates by $0.37. Focusing on LMT’s bottom-line, Miller wrote, “Cash flow from operations were $1.56 billion with free cash flow of $1.27 billion.”
During Lockheed’s Q1 report the company’s CEO Jim Taiclet reaffirmed full-year guidance. Taiclet said, “We remain on track to achieve our full year 2023 financial guidance and continue our robust approach to returning capital to shareholders, with $500 million in share repurchases and $784 million in dividends distributed in the first quarter.”
Miller touched upon these guidance figures, stating, “Lockheed guided full-year earnings between $26.60 per share and $26.90 per share on $65 billion to $66 billion in net sales.” Looking at Wall Street’s full-year estimates, Miller added, “For the year, analysts see earnings jumping 24% to $26.91 per share as revenue edges down 0.36% to $65.746 billion.” After its top and bottom-line beat, LMT shares hit new 52-week highs.
Miller touched upon the stock’s technical momentum, stating, “Shares are holding above their 50-day and 200-day moving averages and reclaimed their 10-day line Tuesday. The current buy zone for the pattern extends to 524.” However, after hitting highs of $508 on Tuesday, LMT shares trended downwards throughout the rest of the week.
Lockheed Martin closed the week trading for $482.55, meaning that they gave up their post-earnings gains and ended up falling by 1.42% during the last 5 trading sessions. Rob Williams, a Nobias 4-star rated author, also highlighted Lockheed’s Q1 results in a Seeking Alpha report this week.
Williams focused on the Lockheed’s operating segment results, stating, “The company’s aeronautics revenue slipped 2% from the prior year to $6.27 billion. The drop was mostly attributed to a decline of $335 million for the F-35 fighter jet program on lower volume. The company has a growing backlog, having received an order from Canada for 88 of the fifth-generation aircraft during Q1.”
During the company’s Q1 report, Lockheed Martin stated that its total backlog stood at $145.09 billion, down slightly from the $149.99 billion backlog that it reported during the same quarter one year ago. “Its missiles and fire control segment saw a 3% decline in net sales to $2.39 billion, including a drop of $60 million on lower output of the Guided Multiple Launch Rocket Systems (GMLRS), a long-range missile that the United States has supplied to Ukraine to defend itself against Russia’s invasion,” Williams added.
Regarding the Ukraine tailwinds, Williams stated, “Jay Malave, CFO of Lockheed Martin, said the company estimates it will see $1.5 billion in sales related to Ukraine this year, about the same as in 2022, and $6 billion by 2027, The Wall Street Journal reported Tuesday.”
Bearish Nobias Credible Analysts Opinions:
Not everyone is bullish on LMT shares, however. After the company’s full-year results were published back in January, Nobias 4-star rated analyst, Noah Poponak, downgraded LMT shares.
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.
According to the Fly on the Wall: “Goldman Sachs analyst Noah Poponak downgraded Lockheed Martin to Sell from Neutral with a price target of $332, down from $388. The U.S. defense budget has grown significantly to an all-time high level, and with a large level of cumulative government debt, focus on slowing spending growth or reducing it outright could return in 2023, Poponak tells investors in a research note. The analyst says Lockheed often grows at similar rates as the budget while it also has a number of program specific headwinds in the near-to-medium term, including F-35, Blackhawk, OPIR, and tough compares in missile and missile defense. This creates an "idiosyncratic growth headwind" on top of the overall budget pressures that could materialize, contends Poponak.”
And although Lockheed beat the market’s expectations during Q1 and reaffirmed full-year guidance, the macro headwinds regarding national debt that Poponak brings up remain in place.
Overall bias of Nobias Credible Analysts and Bloggers:
Overall, 3 out of the 6 opinions expressed by the credible Wall Street analysts tracked by the Nobias algorithm who cover LMT shares imply that shares are likely to rise in value.
The average price target being applied to Lockheed Martin by these 6 credible individuals is $480.67. LMT shares closed the week trading for $482.55. Therefore, the current price is essentially in-line with the average price target, implying a neutral stance by credible analysts.
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.
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