After dropping to the lows of $276 in March 2020, the shares of Lockheed Martin (NYSE: LMT) have recovered a substantial portion of their lost value. Given the strong financial performance and a huge order backlog of $147 billion during the pandemic, Trefis believes that the stock has more room for growth. The company’s Aeronautics division is engaged in the design and development of prominent military aircraft including F-35 Lightning, C-130 Hercules, F-16 Falcon, and F-22 Raptor. The recent acquisition of Aerojet Rocketdyne will strengthen Lockheed Martin’s missiles and space businesses with advanced rocket propulsion technology. Our interactive dashboard analysis highlights Lockheed Martin’s stock performance during the current crisis with that during the 2008 recession.
Timeline of 2020 Crisis So Far:
- 12/12/2019: Coronavirus cases first reported in China
- 1/31/2020: WHO declares a global health emergency.
- 2/19/2020: Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
- 3/23/2020: S&P 500 drops 34% from the peak level seen on Feb 19, as Covid-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid Saudi-led price war
- From 3/24/2020: S&P 500 recovers 88% from the lows seen on Mar 23, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.
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In contrast, here’s how LMT and the broader market performed during the 2007/2008 crisis.
Timeline of 2007-08 Crisis
- 10/1/2007: Approximate pre-crisis peak in S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
- 3/1/2009: Approximate bottoming out of S&P 500 index
- 1/1/2010: Initial recovery to levels before accelerated decline (around 9/1/2008)
Lockheed Martin Stock vs S&P 500 Performance Over 2007-08 Financial Crisis
LMT stock declined from levels of around $109 in September 2007 (pre-crisis peak) to levels of around $63 in March 2009 (as the markets bottomed out), implying LMT stock lost 42% from its approximate pre-crisis peak. It recovered post the 2008 crisis to levels of about $75 in early 2010 – rising by 20% between March 2009 and January 2010. In comparison, the S&P 500 Index first fell 51% in the wake of the recession before recovering 48% by January 2010.
Lockheed Martin’s Fundamentals Look Strong
Lockheed Martin’s revenues have observed a 31% growth from $50 billion in 2017 to $65.4 billion in 2020. The net income margin also improved over the years resulting in consistent dividend growth and lowering of long-term debt obligations. Moreover, the strong order backlog of $147 billion has been supporting revenues and earnings during the pandemic.
Phases of Covid-19 crisis:
- Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally
- Late-March 2020 onward: Social distancing measures + lockdowns
- April 2020: Fed stimulus suppresses near-term survival anxiety
- May-June 2020: Recovery of demand, with gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases
- Since late 2020: Weak quarterly results, but continued improvement in demand and progress with vaccine development buoy market sentiment
As Lockheed Martin’s shareholder returns are backed by strong fundamentals, a huge order backlog, and stable margins, Trefis believes that the stock has more room for growth.
Is there a better pick over Lockheed Martin in the defense contracting business? Lockheed Marin Stock Comparison With Peers summarizes how LMT compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.