Lockheed Martin To Continue Its Positive Streak

Lockheed Martin (NYSE: LMT) is all set to report earnings for the first quarter of FY 2017 on April 25. In the previous quarter, the company managed to beat both earnings and revenue estimates, by a significant margin. In fact, the company beat earnings estimates in all four quarters last year, posting an average earnings surprise of about 12%. The top line in Q4 increased by about 19% year-over-year, driven primarily by increased F-35 sales and the Sikorsky helicopters business.

In general, management appears optimistic about FY 2017; confident that the momentum driving the top line will continue spurring on. 2017 net sales are expected to grow by about 4.6% to 7.1%, compared to its previous forecast of an increase of 7%.

For the first quarter, analysts estimate earnings to come in at $2.73 a share, reflecting a ~6% jump year-over-year, with revenues coming in around $11.26 billion, up ~4% year-over-year.

Probable Highlights:

• The F-35 program is expected to boost the top line yet again this quarter. Ever since President Trump’s Twitter rant attacking mounting costs at the program, the company has worked tirelessly to ensure a lower price tag per aircraft. Lockheed managed to reduce the cost of the fighter jet by a significant 6-8% since then. This led to the signing of a mammoth $8.5 billion contract from the Department of Defense (DoD) for the production of 90 F-35 fighters.

• Additionally, during the first quarter, the defense contractor also received a $1.1 billion contract from the U.S. Navy for providing recurring logistics support and sustainment services for their recently acquired F-35 Lightning II aircraft. Further, the company was also awarded a $750 million contract by the Defense Logistics Agency for providing flight line spare parts. Other important deals that could boost revenues in the first quarter include two modification contracts worth $416.9 million received by United Launch Services, LLC (ULS).

• In a previous announcement, Lockheed management had projected a 40% hike in its 2017 delivery numbers in comparison to the last year. If this forecast holds true, we could see the top line jump significantly over the year, beginning as early as this quarter.

• In terms of orders, the company had earlier announced that it anticipates additional GPS III satellite orders during the first half of the year. Additionally, it also hopes to finally conclude the Hellfire missile order that was put on hold last year. The earnings call could help provide some more information on these deals.

• The positive aside, we can see a dip in the top line at the Missile and Fire Control segment in the first quarter. This is primarily due to unfavorable timing of deliveries. That said, a surge in deliveries can be expected in the second quarter of 2017, bringing the segment back on track.

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research