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Lockheed Martin F-35

In a bull market that demands perfection Lockheed Martin (LMT) missed GAAP earnings estimates and the stock price responded negatively. The company was hit with a charge in the Aeronautics segment and the sales outlook was cut, more on that below. There is also the uncertainty of the acquisition of Aerojet Rocketdyne (AJRD) and the lengthy regulatory review process. Lastly, there is fear by investors that the U.S. defense budget may be cut in the future. In fact, the stock price has been trending down since April 2021. However, dig a little deeper and one can see that Lockheed Martin is performing well and some of the negative may be unfounded. The most recent quarter saw revenue increase in all four business segments. The company also upped its earnings outlook for 2021. Furthermore, Lockheed Martin is a Dividend Contender with 19 years of dividend growth. The stock is undervalued today, and I view Lockheed Martin as a long-term buy and now is the time.

Overview of Lockheed Martin

Lockheed Martin Corporation, which was founded in 1912, is today the world’s largest defense company. The company consists of four business segments: Aeronautics (~40% sales) – which produces military aircraft; Rotary and Mission Systems (~26% sales) – which houses combat ships, naval electronics, and helicopters; Missiles and Fire Control (~16% sales) – which creates missile defense systems; and Space Systems (~17% sales) – which produces satellites. The company has significant strength and exposure in military aircraft and produces the F-16, F-35, F-22, C-130, C-5, P-3, Black Hawk, Chinook, and others. About 60% of the company’s revenues comes from the U.S. Department of Defense, with other U.S. government agencies (10%) and international clients (30%) making up the remainder. The company had total revenue of over $65.4 billion in 2020 and $66.8 billion in the LTM.

Aeronautics Earnings Hit by a Charge

Lockheed Martin had a decent Q2 2021 that was affected by a one-time event…

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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