How Did Lockheed Perform In Q2?

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LMT: Lockheed Martin logo
LMT
Lockheed Martin

Lockheed Martin (NYSE: LMT) posted a rather stellar earnings this time around, raising its 2018 outlook for the second time this year. In general, the company managed to beat both the revenue and earnings estimate, comfortably, by quite a large margin. The top and bottom lines in the quarter were boosted on strong performance across all segments, most notably Aeronautics and Missiles & Fire Control. Figures at Space failed to impress yet again.

That said, the company’s cash flow was all but negated this time around on pension contributions. For this reason, the stock price remained relatively unmoved. At the moment, the stock price falls in line with our price estimate. We have created an interactive dashboard to best elaborate on our valuation method and reasoning in arriving at this estimate. Please click on the link to change drivers and come up with your own price.

  • As mentioned above, cash flows in the quarter came in rather low on a one-time contribution that was made to the company’s pension fund. This is the primary reason why, in the first six months of 2018, the defense giant’s cash flows stand only at $80 million, while it came in at around $2.8 billion in the same period last year. However, despite this contribution, Lockheed believes cash flows in the full year to now come in at around $3.3 billion, instead of the $3 billion expected previously. This comes as some respite to investors who had previously panicked at the news.
  • Aerospace and Missiles & Fire Control were the best performers in the quarter. Aerospace grew by about 8% on the back of higher F-35 production volume, while MFC was driven by higher volumes across multiple businesses. We expect both segments to produce strong results through the remainder of the year as well.
  • Further, management decided to raise its outlook for 2018 for the second time in the year during the call. For the full year, Lockheed now expects 2018 sales to lie in the range of $51.6 billion and $53.1 billion, compared to its previous guidance of $50.35 billion to $51.85 billion, while earnings are now anticipated to be between $$16.75 to $17.05 a share, up from $15.80 and $16.10.
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