What To Expect From Lockheed Martin’s Q3?

October 11th, 2022 by Trefis Team
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LMT: Lockheed Martin logo
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Lockheed Martin

Lockheed Martin (NYSE: LMT) is scheduled to report its Q3 2022 results on Tuesday, October 18. We expect Lockheed Martin to likely post revenue and earnings slightly above the street expectations. The company’s F-35 deliveries in September were impacted after the Pentagon’s suspension. It was learned that a metal component used in the turbomachine pump comes from China. Although the turbomachine pump was made by Honeywell (NYSE: HON), the deliveries for the fighter jets were put on hold. Just last week, the Pentagon signed a waiver to allow the Chinese metal and resume deliveries. [1] Lockheed Martin expects its deliveries to be between 147 and 153 jets by 2024 and increase to 156 in 2025 and beyond. Although we expect the company to navigate well over the latest quarter, our forecast indicates that LMT stock has only a little room for growth from its current levels, as discussed below. Our interactive dashboard analysis of Lockheed Martin Earnings Preview has additional details.

(1) Revenues expected to be above the consensus estimates

  • Trefis estimates Lockheed Martin’s Q3 2022 revenues to be around $16.8 billion, reflecting mid-single-digit y-o-y growth and slightly above the $16.6 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 in the near term.
  • Looking at Q2 2022, the company saw its sales decline 9% y-o-y to $15.4 billion. The decline was seen across segments.
  • Our dashboard on Lockheed Martin Revenues has more details on the company’s segments.
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(2) EPS likely to be above the consensus estimates

  • Lockheed Martin’s Q3 2022 adjusted earnings per share (EPS) is expected to be $6.78 per Trefis analysis, above the consensus estimate of $6.68.
  • The company’s net income of $1.7 billion in Q2 2022 reflected a 6% drop from its $1.8 billion figure in the prior-year quarter due to lower sales.
  • For the full-year 2022, we expect the adjusted EPS to be lower at $22.34 compared to the EPS of $22.76 in 2021.

(3) LMT stock looks reasonably valued

  • We estimate Lockheed Martin’s Valuation to be around $445 per share, which is only 8% above the current market price of $410, implying that investors may be better off waiting for a dip to enter LMT stock for better gains in the long run.
  • At its current levels, LMT stock is already trading at 18x forward EPS estimate of $22.34, compared to the last three-year average of 15x.
  • However, 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 like it has only a little room for growth, 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 Aerojet Rocketdyne vs. Brink’s Company.

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 Oct 2022
MTD [1]		 2022
YTD [1]		 2017-22
Total [2]
 LMT Return 7% 16% 65%
 S&P 500 Return 1% -24% 62%
 Trefis Multi-Strategy Portfolio -1% -27% 189%

[1] Month-to-date and year-to-date as of 10/11/2022
[2] Cumulative total returns since the end of 2016

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Notes:
  1. F-35 jet deliveries can resume following waiver for Chinese-origin alloy, Pentagon says, Mike Stone, Reuters, Oct 8, 2022 [↩]