What Will Drive Lockheed Martin’s Near Term Growth?

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Lockheed Martin

Lockheed Martin (NYSE: LMT) posted a rather positive earnings through the first half of the year, prompting the management to raise its 2018 outlook for a second time. In general, the company managed to beat both the revenue and earnings estimate, comfortably, by quite a large margin, in both quarters thus far. The top and bottom lines in the first half were boosted on strong performance across all segments, most notably Aeronautics and Missiles & Fire Control. That said, figures at Space failed to impress much.

We have created an interactive dashboard What Is The Outlook For LMT on the company’s expected performance in 2019. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues and earnings.

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In general, most defense companies like Lockheed, Boeing, and Northrop are benefiting greatly on increased global political turmoil. With multiple conflicts being fought on multiple fronts, defense contractors are seeing increased demand for a variety of their products, with an urgent need for weapons with long range fighting capabilities.

In this respect, one of the biggest revenue drivers at the company, right now, is its famed F-35 program. At the moment, 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.

Further, the company is also seeing healthy growth at their Missiles & Fire Control segment. In particular, in the recent few months, the segment has witnessed a significant increase in orders for its Javelin anti-tank missiles and the Patriot Advanced Capability-3 (PAC-3) Missile Segment Enhancement (MSE) missiles. Additionally, the division is generating a lot of interest with their hypersonic weapon (weapons that travel faster than the speed of sound) category, a space that’s expected to explode going forward on increased international interest. In this respect, we expect a steady rise in volumes through the next few quarters to really help boost the top line at the segment.

While the two segments mentioned above will help the company expand their top line notably, we expect both other divisions to contribute positively to the financials as well, albeit at a slower pace. Despite that, all in all, it looks as though Lockheed has a lot to offer in the coming months.

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