What To Expect From Lockheed Martin’s Q2?

LMT: Lockheed Martin logo
Lockheed Martin

Lockheed Martin (NYSE: LMT) is scheduled to report its Q2 2022 results on Tuesday, July 19. We expect Lockheed Martin to likely post revenue and earnings below the street expectations. The company expects low single-digit growth in revenues and profits in the coming years. New business awards will likely drive the company’s performance in the near term, with possible increased defense spending by NATO members. Germany and Canada plan to add F-35s to their air forces, increasing the company’s backlog by another 123 F-35 jets.

Although we expect the company to navigate well over the latest quarter, our forecast indicates that LMT stock is fairly valued at its current levels, as discussed below. Our interactive dashboard analysis of Lockheed Martin Earnings Preview has additional details.

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(1) Revenues expected to be marginally below the consensus estimates

  • Trefis estimates Lockheed Martin’s Q2 2022 revenues to be around $15.9 billion, marginally below the $16.0 billion consensus estimate.
  • With the rising macroeconomic tensions, it is likely that governments will resort to increased spending on defense, and Lockheed Martin should benefit from the same. However, supply chain disruptions may weigh on the company’s top-line growth.
  • Looking at Q1 2022, the company saw its sales decline 8% y-o-y to $15.0 billion. This fall was led by a low teens revenue decline in space, and rotary and mission systems segments, while missiles and fire control sales were down in low double-digits. Aeronautics segment revenue remained flat at $6.4 billion.
  • Our dashboard on Lockheed Martin Revenues has more details on the company’s segments.

(2) EPS likely to be below the consensus estimates

  • Lockheed Martin’s Q2 2022 adjusted earnings per share (EPS) is expected to be $6.35 per Trefis analysis, slightly below the consensus estimate of $6.39.
  • The company’s net income of $1.7 billion in Q1 2022 reflected a 6% drop from its $1.8 billion figure in the prior-year quarter due to lower sales, partly offset by a 28 bps rise in net income margin.
  • However, the company’s operating margins contracted around 50 bps y-o-y to 12.9% in Q1.
  • For the full-year 2022, we expect the adjusted EPS to be higher at $26.68 compared to EPS of $22.76 in 2021.

(3) LMT stock looks reasonably valued

  • We estimate Lockheed Martin’s Valuation to be around $449 per share, which is only 8% above the current market price of $414, implying that investors may be better off waiting for a dip to enter LMT stock for better gains in the long run.
  • Our valuation is based on a forward P/E ratio of 17x, compared to the last three-year average of 15x.
  • If the company reports upbeat Q2 results and provides an outlook better than the street estimates, the P/E multiple will likely be revised upward, resulting in higher levels for LMT stock.
 While LMT stock looks fully valued, it is helpful to see how Lockheed Martin’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Evoqua vs. Dover.

Despite inflation rising and the Fed raising interest rates, among other factors, LMT stock has risen 16% this year. But can it drop from here? See how low Lockheed Martin stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Jul 2022
MTD [1]
YTD [1]
Total [2]
 LMT Return -4% 16% 66%
 S&P 500 Return 1% -20% 71%
 Trefis Multi-Strategy Portfolio 3% -21% 211%

[1] Month-to-date and year-to-date as of 7/13/2022
[2] Cumulative total returns since the end of 2016

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