Below are the key drivers of Lockheed Martin's value that present opportunities for upside or downside to the Trefis price estimate:
Missile and Fire Control Systems came in $8.9 billion in 2018. We expect that number to rise by anywhere from 10-15% in 2019, as the Federal Government continues to allocate funds to the development of missiles, and increases order flow.
With the growing threat of attack from airborne missiles, missile defense systems are in demand from governments of many countries including the U.S. Lockheed possesses multiple, highly capable and efficient missile defense systems which include the Aegis, Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD). Sales of these systems will likely bring significant contracts and sales to the company in the coming years.
The F-35 is a multi-role combat aircraft being developed by Lockheed Martin. The aircraft is part of the Joint Strike Fighter (JSF) program, intended to replace a wide range of existing combat aircraft in the U.S., U.K., Canada and other countries. The F-35 is a crucial program for Lockheed Martin and constituted around 22% of its top line in 2015. Over the coming years, the program is expected to occupy an even larger share in the company's top line driven by its planned production ramp up. Overall, the U.S. government plans to purchase over 2,400 F-35s, while international governments are expected to purchase another 600 F-35s.
Looking ahead, as production of the F-35 rises in the coming years, this program will drive a significant portion of Lockheed's value.
With a 2009 directive by the Office of Management and Budget (OMB) to further migrate from cost-based to fixed-price based contracts, we expect the company's divisions to be subjected to higher risk, as any cost over-runs would directly impact margins under a fixed-price contract (unlike a cost-reimbursement contract, where the contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit). This trend can significantly impact Lockheed Martin's EBITDA margins in future years.
About 94% of Lockheed's revenue comes from the U.S. government through its agencies such as the Department of Defense, Homeland Security, and NASA. As a result of this high reliance on government spending, Lockheed is highly vulnerable to spending cuts from the U.S. government.
In 2011, the passage of the Budget Control Act required defense spending to be slashed by around $500 billion over 2011-2021. These cuts forced the government to steadily slash its defense spending during 2011-2015. In turn, lower government defense spending decreased overall contract volume for Lockheed. However, looking ahead, with improved fiscal deficit, the government has begun to grow its defense spending. This recovery in U.S. defense spending will likely help grow Lockheed's contract volume and its top line in the coming years.
We expect the Trump administration to spend close to $700 billion on defense in 2019.
With increasing sophistication and growth in cyber attacks in recent years, IT security challenges are mounting for the U.S. government, which include cyber threats from foreign nations and terrorist organizations as well as virus/malware intrusions. We expect this trend to drive increased strengthening of the Federal IT infrastructure. This will likely maintain demand for information systems services. Lockheed is one of the key providers of cyber security solutions.
Lockheed Martin (NYSE:LMT), with support from increasing government budgets, has seen revenues in recent quarters pick up. The latest quarter witnessed a 8.5% rise in net sales. With the recent pullback in the stock, Lockheed Martin looks more attractive than previously. ...More
Lockheed Martin (NYSE: LMT) posted a rather positive earnings through the first half of the year, prompting the management to raise its 2018 outlook for a second time. In general, the company managed to beat both the revenue and earnings estimate, comfortably, by quite a large margin, in both quarters thus far. ...More
Lockheed Martin (NYSE: LMT) posted a rather stellar earnings this time around, raising its 2018 outlook for the second time this year. In general, the company managed to beat both the revenue and earnings estimate, comfortably, by quite a large margin. ...More
Lockheed Martin (NYSE: LMT) posted a rather stellar earnings this time around, while raising its 2018 outlook notably. The company managed to beat both, the revenue and earnings estimate, comfortably, by quite a large margin. The top and bottom lines in the quarter were boosted on strong performance across all segments, most notably Aeronautics and Missiles & Fire Control. ...More
Lockheed Martin (NYSE: LMT) posted rather strong earnings last time around. Barring a one-time charge of about $1.9 billion on the recent tax reform, the company managed to post an increase of about 25% in earnings year over year at $3.87 (adjusted number of $4.30), however, the unadjusted figure fell short of analyst estimates. ...More
Lockheed Martin (NYSE: LMT) posted stellar earnings this time around. Barring a one-time charge of about $1.9 billion on the recent tax reform, the company managed to post an increase of about 25% in earnings year over year at $3.87, (adjusted number of $4.30), however, the unadjusted figure fell short of analyst estimates. ...More
Lockheed Martin (NYSE: LMT) reported a rather mixed earnings last time around. The company missed on expected earnings marginally, while revenues missed the expectation significantly. However, the company mentioned that this shortfall is only timing related, and that the fourth quarter will see things bounce back significantly. ...More
The F-35 program is the most expensive military weapons system in history and has, hence, had its fair share of critics. Since the beginning, people have argued that the plane has many design flaws that have led to heavy additional costs and significant delays in the development process. ...More
Lockheed Martin (NYSE: LMT) has managed to prove itself in 2017. The company managed to post great revenue and earnings figures throughout the year. All segments managed to record steady improvements over the last three quarters, and it is expected that the company will continue this positive streak well into 2018 as well. ...More
The F-35 Lightning II aircraft is one of the most stellar examples of advanced aviation technology out there. It has been designed with the sole purpose of combating advanced 21st century enemies that are capable of superior air defences. ...More
Lockheed Martin (NYSE: LMT) reported a mixed Q3 earnings this time around. The company missed on expected earnings marginally, while revenues missed the expectation significantly. However, the company believes that this shortfall is only timing related, and that it will more than make up for it in the fourth quarter. ...More
Lockheed Martin (NYSE: LMT) is all set to report earnings for Q3 on October 24. The company has been doing quite well in the year so far. In the previous quarter, it managed to post an earnings beat, while revenues came in marginally lower year-over-year. That said, the world's largest defense contractor incurred heavy one-time charges on some of its major programs in Q1. ...More
Lockheed Martin (NYSE: LMT) reported a strong quarter this time around, beating both the earnings and revenue consensus estimates by a considerable margin. The top line was helped by the fact that all segments, except Missiles and Fire Control, managed to post positive growth in sales. ...More
Lockheed Martin (NYSE: LMT) is all set to report earnings for the second quarter of FY 2017 on July 18. In the first quarter, the company managed to beat the earnings estimate by a significant margin, while falling short on the revenue estimate marginally. In fact, the company has managed to post an average earnings surprise of about 14% in the trailing four quarters. ...More
Lockheed Martin (NYSE: LMT) reported a solid beginning to the year. Earnings (excluding certain one time charges) beat the consensus by a sizeable margin, while revenues missed marginally. The top line was spurred on by positive growth at all segments. ...More
Lockheed Martin (NYSE: LMT) is all set to report earnings for the first quarter of FY 2017 on April 25. In the previous quarter, the company managed to beat both earnings and revenue estimates, by a significant margin. In fact, the company beat earnings estimates in all four quarters last year, posting an average earnings surprise of about 12%. ...More
Lockheed Martin (NYSE: LMT) purchased Sikorsky for close to $9 billion in November of 2015. At the time, most analysts were of the opinion that LMT had overpaid. Additionally, they believed that Sikorsky would have fit better at Textron, which manufactures Bell helicopters. ...More
Lockheed Martin reported a stellar quarter this time around. The company posted a quarterly sales increase of about 19% year over year, driven primarily by increased F-35 sales and the Sikorsky helicopters business. ...More
Lockheed Martin (NYSE: LMT) has performed solidly in the first three quarters of the year, beating analyst estimates for earnings every time. We believe this momentum continued into the fourth quarter as well on the back of higher F-35 sales and the Sikorsky inclusion. ...More
Earlier last month, President-elect Donald Trump took to Twitter to express his concerns regarding the mounting costs of the F-35 program. In his post, he mentioned that he will approach Boeing (NYSE:BA) to provide quotes for a "comparable" F/A-18 jet. ...More