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Lockheed (LMT) Wins $500M Deal From Croatia: Time to Buy?
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Lockheed Martin Corp. (LMT - Free Report) recently secured a contract worth $500 million from the Government of Croatia to supply eight UH-60M Black Hawk helicopters, along with their associated spare parts and services. This award win boosts Lockheed’s revenue generation prospects from its Sikorsky business unit, which has been one of the topmost pioneers in building military rotorcrafts.
Now, before asserting whether it will be profitable to buy LMT’s shares at present, let’s delve into its year-to-date performance, growth prospects as well as risks (if any) to make an insightful decision.
LMT Outperforms Industry & Sector
Shares of Lockheed have risen 3.3% in the year-to-date period, outperforming the Zacks aerospace-defense industry’s decline of 12.1%. It has also outpaced the broader Zacks Aerospace sector’s decline of 6.2% in the same time frame.
A similar trend can be seen in the performance of LMT’s competitors, RTX Corp. (RTX - Free Report) , General Dynamics (GD - Free Report) and L3Harris Technologies (LHX - Free Report) , which have witnessed a surge of 23.2%, 12.3% and 14.1%, respectively, year to date.
LMT’s YTD Performance
Image Source: Zacks Investment Research
Key Catalysts Benefiting Lockheed
Valuable Order Growth: Solid order growth, like the latest one from Croatia, has always been playing the role of a crucial growth catalyst for the United States’ largest defense contractor. While a steady order flow reflects the notable demand that Lockheed’s varied products enjoy in the global defense space, cumulative backlog arising out of those order flows strengthens the company’s revenue generation prospects. Notably, Lockheed’s total backlog came in at a record $159.4 billion as of Mar 31, 2024.
Impressive Defense Budget: With the United States being the most prominent weapon exporter in the world, the nation’s defense budget plays a vital role in bolstering the growth of U.S. defense contractors. It does so by offering notable funding support for research, innovation and development of more advanced arms and ammunitions.
Notably, the fiscal 2025 U.S. defense budget, which includes funding of $850 billion for the U.S. Department of Defense, constitutes continuous funding support for many of Lockheed’s significant programs, including the F-35, CH-53K, UH-60M as well as an enhanced emphasis on its advanced munitions programs, such as LRASM, Javelin and PAC-3, as well as the long-range hypersonic weapon.
Stable Financials Boosting Shareholder Value: Lockheed’s cash and cash equivalents at the end of the first quarter of 2024 totaled $2.79 billion, while its current debt was $0.17 billion. So, it would be safe to conclude that the stock holds a strong solvency position, at least in the near term.
This solid financial position must have been encouraging Lockheed to reward its shareholders with solid dividend payouts. As of Mar 31, 2024, Lockheed paid out dividends worth $780 million to its shareholders.
Headwinds to Keep an Eye on
Despite being a prominent defense contractor, Lockheed faces some notable industry challenges, like a shortage of skilled labor, with an aging workforce (particularly) being a major cause of concern. Per a study by the Aerospace Industries Association, 29% of the aerospace-defense industry’s employees are above the age of 55, creating waves of retirement impact that are estimated to create a projected gap of 3.5 million workers by 2026. So, as aircraft manufacturers have started to ramp up their production rates, such labor shortages might affect aerospace stocks like Lockheed Martin.
Moreover, in 2023, China’s Ministry of Commerce announced that it has added Lockheed to its “unreliable entities list” in connection with certain foreign military sales by the U.S. government to Taiwan, which involves Lockheed’s products and services. China declared that it would impose certain sanctions against Lockheed, including a fine equal to twice the value of the arms that Lockheed had sold to Taiwan since September 2020.
The nation also implemented broad-based export restrictions on certain minerals used in the production, among other things, of semiconductors and missile systems. If China further restricts the export of these materials or imposes additional sanctions, Lockheed’s business could be adversely impacted.
Will LMT Continue to Grow?
Despite the challenges mentioned above, one may remain optimistic about the company’s near-term growth prospects. A quick sneak peek at its earnings and sales estimates reflects the same.
Upbeat Estimates
The Zacks Consensus Estimate for 2024 and 2025 sales reflects an improvement of 3.2% and 3.9%, respectively, year over year.
The Zacks Consensus Estimate for 2024 and 2025 earnings per share reflects an upward movement of 0.7% and 0.6%, respectively, over the past 90 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
Trading at a Discount
In terms of valuation, LMT’s forward 12-month price-to-earnings (P/E) is 17.09X, a discount to the industry’s average of 18.36X. This suggests that investors will be paying a lower price than the company's expected earnings growth.
Image Source: Zacks Investment Research
What Should You Do?
To sum up, despite the challenges Lockheed is facing at present, this might be a favorable entry point for investors interested in this stock, considering the upward revisions in its earnings estimates, solid backlog count boosting its revenue prospects and its discounted valuation. LMT currently has a VGM Score of A, which indicates a strong performance.
Image: Bigstock
Lockheed (LMT) Wins $500M Deal From Croatia: Time to Buy?
Lockheed Martin Corp. (LMT - Free Report) recently secured a contract worth $500 million from the Government of Croatia to supply eight UH-60M Black Hawk helicopters, along with their associated spare parts and services. This award win boosts Lockheed’s revenue generation prospects from its Sikorsky business unit, which has been one of the topmost pioneers in building military rotorcrafts.
Now, before asserting whether it will be profitable to buy LMT’s shares at present, let’s delve into its year-to-date performance, growth prospects as well as risks (if any) to make an insightful decision.
LMT Outperforms Industry & Sector
Shares of Lockheed have risen 3.3% in the year-to-date period, outperforming the Zacks aerospace-defense industry’s decline of 12.1%. It has also outpaced the broader Zacks Aerospace sector’s decline of 6.2% in the same time frame.
A similar trend can be seen in the performance of LMT’s competitors, RTX Corp. (RTX - Free Report) , General Dynamics (GD - Free Report) and L3Harris Technologies (LHX - Free Report) , which have witnessed a surge of 23.2%, 12.3% and 14.1%, respectively, year to date.
LMT’s YTD Performance
Key Catalysts Benefiting Lockheed
Valuable Order Growth: Solid order growth, like the latest one from Croatia, has always been playing the role of a crucial growth catalyst for the United States’ largest defense contractor. While a steady order flow reflects the notable demand that Lockheed’s varied products enjoy in the global defense space, cumulative backlog arising out of those order flows strengthens the company’s revenue generation prospects. Notably, Lockheed’s total backlog came in at a record $159.4 billion as of Mar 31, 2024.
Impressive Defense Budget: With the United States being the most prominent weapon exporter in the world, the nation’s defense budget plays a vital role in bolstering the growth of U.S. defense contractors. It does so by offering notable funding support for research, innovation and development of more advanced arms and ammunitions.
Notably, the fiscal 2025 U.S. defense budget, which includes funding of $850 billion for the U.S. Department of Defense, constitutes continuous funding support for many of Lockheed’s significant programs, including the F-35, CH-53K, UH-60M as well as an enhanced emphasis on its advanced munitions programs, such as LRASM, Javelin and PAC-3, as well as the long-range hypersonic weapon.
Stable Financials Boosting Shareholder Value: Lockheed’s cash and cash equivalents at the end of the first quarter of 2024 totaled $2.79 billion, while its current debt was $0.17 billion. So, it would be safe to conclude that the stock holds a strong solvency position, at least in the near term.
This solid financial position must have been encouraging Lockheed to reward its shareholders with solid dividend payouts. As of Mar 31, 2024, Lockheed paid out dividends worth $780 million to its shareholders.
Headwinds to Keep an Eye on
Despite being a prominent defense contractor, Lockheed faces some notable industry challenges, like a shortage of skilled labor, with an aging workforce (particularly) being a major cause of concern. Per a study by the Aerospace Industries Association, 29% of the aerospace-defense industry’s employees are above the age of 55, creating waves of retirement impact that are estimated to create a projected gap of 3.5 million workers by 2026. So, as aircraft manufacturers have started to ramp up their production rates, such labor shortages might affect aerospace stocks like Lockheed Martin.
Moreover, in 2023, China’s Ministry of Commerce announced that it has added Lockheed to its “unreliable entities list” in connection with certain foreign military sales by the U.S. government to Taiwan, which involves Lockheed’s products and services. China declared that it would impose certain sanctions against Lockheed, including a fine equal to twice the value of the arms that Lockheed had sold to Taiwan since September 2020.
The nation also implemented broad-based export restrictions on certain minerals used in the production, among other things, of semiconductors and missile systems. If China further restricts the export of these materials or imposes additional sanctions, Lockheed’s business could be adversely impacted.
Will LMT Continue to Grow?
Despite the challenges mentioned above, one may remain optimistic about the company’s near-term growth prospects. A quick sneak peek at its earnings and sales estimates reflects the same.
Upbeat Estimates
The Zacks Consensus Estimate for 2024 and 2025 sales reflects an improvement of 3.2% and 3.9%, respectively, year over year.
The Zacks Consensus Estimate for 2024 and 2025 earnings per share reflects an upward movement of 0.7% and 0.6%, respectively, over the past 90 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Trading at a Discount
In terms of valuation, LMT’s forward 12-month price-to-earnings (P/E) is 17.09X, a discount to the industry’s average of 18.36X. This suggests that investors will be paying a lower price than the company's expected earnings growth.
What Should You Do?
To sum up, despite the challenges Lockheed is facing at present, this might be a favorable entry point for investors interested in this stock, considering the upward revisions in its earnings estimates, solid backlog count boosting its revenue prospects and its discounted valuation. LMT currently has a VGM Score of A, which indicates a strong performance.
Those who already own this stock may continue to do so. This can be justified by the fact that LMT has a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.