The shares of Lockheed Martin (NYSE: LMT) have almost recovered to pre-Covid levels supported by long-term defense contracts by the U.S. government and continued growth in military spending. The stock observed a headwind in January due to delays in full-rate production of the F-35 and the Senate’s override on the defense bill. Subsequently, the stock has rallied by 20% since early February driven by multiple contract awards by the Army, Navy, and Air Force. As Lockheed Martin’s shareholder returns are backed by strong fundamentals, a huge order backlog, stable margins, and consistent dividend payout, Trefis believes that the stock remains a good pick and highlights the quarterly trends in revenues, earnings, and valuation multiple in an interactive dashboard analysis, Lockheed Martin Earnings Preview.
Revenues and earnings to observe 4% and 6% growth in 2021, respectively
In 2020, Lockheed Martin’s four operating segments, Aeronautics, Missiles, Rotary Systems, and Space reported $26 billion, $11 billion, $16 billion, and $12 billion of the total revenues, respectively. The company is expected to observe a low single-digit broad-based growth across segments in 2021. Notably, the earnings per share is likely to expand at a high single-digit rate due to stock repurchases and lower shares outstanding. Given that the company has a huge order backlog of $147 billion and does not observe material seasonal trends, the annual revenue and earnings growth figures are expected to be similar across quarters.
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Favorable dividend yield still makes the stock a good pick
The company increased its quarterly dividend per share by 8.3% from $2.40 in Q3 2020 to $2.60 in Q4 2020. At a current market price of $390 per share, the annual dividend yield stands at 2.6% – higher than the 10-yr treasury yield of 1.69%. Moreover, the multi-year government contracts and sizable order backlog make the stock a safer bet during uncertain macroeconomic periods. Notably, the company’s net margin has remained fairly stable at 10% in the past few years – assisting consistent capital return to shareholders in the form of dividends and share repurchases.
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