Lockheed Martin: The Year In Review

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Lockheed Martin (NYSE: LMT) has managed to prove itself in 2017. The company managed to post great revenue and earnings figures throughout the year. All segments managed to record steady improvements over the last three quarters, and it is expected that the company will continue this positive streak well into 2018 as well.

Given its stellar performance to date, Lockheed’s management has decided to raise its full-year guidance for earnings significantly. The company now hopes to take in a significantly higher earnings between $12.85 to $13.15 per share, up from $12.30 and $12.60 per share in FY 2017.

Key Highlights From The Year:

  • Over the year, the F-35 program has cemented its importance in the company even further. Many governments are looking to replace older jets for newer ones as the life cycle of their fleets approach their end over the next decade. The company is expected to benefit greatly in this respect. At the moment, the program accounts for roughly 25% of Lockheed’s total revenue. We can expect this number to cross more than 50% over the next few years, if the company manages to bring the price down further. However, this seems to be a goal that is quite achievable.
    • In the year, the company worked hard to bring down the price of the jet.  The U.S. Air Force had in the past asked the company to bring the cost per plane down to about $85 million. In May this year, Lockheed managed to bring the cost per plane down to just under $100 million (not including the engines), which is a significant drop.
    • In the second half of the year, the Pentagon ordered 90 planes at a price of about $7.2 billion, which brings the cost per plane down to a whopping $80 million. This again is exclusive of engines, however. At present, the engine costs about $16 million, bringing the cost for the complete plane to a grand total of $96 million. Regardless, this is a major accomplishment by the company. What it essentially means is that Lockheed has managed to shave off about 20% of the airplane’s cost in just six months.
  • Probably the most exciting news to coming out of the year was the signing of a major $110 billion arms deal between the U.S. and Saudi Arabia. Due to its position in the market, Lockheed seems to have garnered the notable majority of this deal. The middle-eastern giant is expected to procure the company’s integrated air and missile defense, combat ship, tactical aircraft, and rotary wing technologies and programs for an estimated $28 billion. This deal is expected to add significant value to the company over the next decade. We can expect to learn about this deal in the upcoming earnings call.
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