Earnings Beat In Cards For Lockheed Martin Stock?

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Lockheed Martin

Lockheed Martin (NYSE: LMT) is scheduled to report its Q4 2022 results on Tuesday, January 24. We expect Lockheed Martin to post mixed results, with its revenue slightly below but earnings landing above the street expectations. The company’s F-35 deliveries in December were impacted following a temporary pause in flight operations, resulting in 141 deliveries for the year, compared to the target of 148. [1] Last week Canada announced its plans to buy 88 F-35s in a $14 billion deal. However, LMT stock has been weighed down recently after one of the Wall Street research firms downgraded defense stocks citing concerns over possible reduced government defense spending. 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.

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

  • Trefis estimates Lockheed Martin’s Q4 2022 revenues to be around $18.2 billion, reflecting around 3% y-o-y growth but slightly below the $18.3 billion consensus estimate.
  • Looking at Q3 2022, the company saw its sales rise 3% y-o-y to $16.6 billion. The growth was led by Aeronautics and Space segments, up 8% and 7%, respectively. This trend is expected to continue in the near term.
  • 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 Q4 2022 adjusted earnings per share (EPS) is expected to be $7.48 per Trefis analysis, above the consensus estimate of $7.39.
  • The company’s net income of $1.8 billion in Q3 2022 reflected a <1% drop from its $1.8 billion figure in the prior-year quarter, as higher sales were offset by a 130 bps decline in operating margins.
  • This can primarily be attributed to the company’s missiles and fire control segment, which saw lower margins for its integrated air and missile defense programs, a trend expected to continue in the near term.
  • For the full-year 2023, we expect the adjusted EPS to be higher at $27.56 compared to the EPS of $22.76 in 2021 and an estimated $21.79 in 2022.

(3) LMT stock looks reasonably valued

  • We estimate Lockheed Martin’s Valuation to be around $455 per share, which is only 1% above the current market price of $450, 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 16x forward EPS estimate of $27.56, compared to the last three-year average of 15x.
  • However, if the company reports upbeat Q4 results and provides a 2023 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 fairly 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 at how counter-intuitive the stock valuation is for Herbalife vs. Jacobs Engineering Group.

Despite inflation rising and the Fed raising interest rates, among other factors, LMT stock has risen 20% in the last twelve months. 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 Jan 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 LMT Return -8% -8% 80%
 S&P 500 Return 4% 4% 79%
 Trefis Multi-Strategy Portfolio 8% 8% 241%

[1] Month-to-date and year-to-date as of 1/16/2023
[2] Cumulative total returns since the end of 2016

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Notes:
  1. Lockheed Martin’s Press Release, Dec 30, 2022 []