Lockheed Martin’s Mixed Quarter: A Closer Look
The world’s largest defense contractor, Lockheed Martin (NYSE: LMT), recently reported its third-quarter earnings, which were met with a lukewarm response from investors. Despite beating earnings expectations, the company missed on revenue due to delivery delays with the F-35 aircraft, causing shares to drop 5% as of 10:30 a.m. ET.
A Mixed Bag
Lockheed Martin earned $6.80 per share on sales of $17.1 billion in the third quarter, which is a mixed result relative to Wall Street’s consensus estimate of $6.50 per share on sales of $17.4 billion. The company’s operating margin of 12.5% was about 60 basis points ahead of expectations, and free cash flow of $2.1 billion exceeded Wall Street’s forecast of $1.3 billion.
Delivery Delays Weigh on Revenue
The F-35 aircraft delivery delays resulted in a $400 million sales headwind in the quarter, but the company expects to make up at least some of that miss in future quarters. Lockheed Martin raised its full-year 2024 earnings forecast to $26.65 per share, from $26.10 to $26.60 per share, and now expects $71.25 billion in annual revenue, narrowing its prior projection of $70.5 billion to $71.5 billion.
Strong Bookings and Dividend Increase
Despite the anemic 1% year-over-year sales growth in the quarter, Lockheed Martin produced a book-to-bill ratio of 1.43, setting it up well for future periods. The company also raised its dividend by 5% and authorized $3 billion in additional share repurchases.
A Solid Defensive Choice
Lockheed Martin has a leading role on some of the nation’s most important defense priorities, and a backlog of $165 billion in future business provides some degree of predictability. For investors looking for a solid income investment with some growth upside, Lockheed remains a solid defensive choice.
Future Prospects
While the recent quarter may have been a mixed bag, Lockheed Martin’s strong bookings, dividend increase, and solid backlog position the company well for future growth. As the world’s largest defense contractor, Lockheed Martin is well-positioned to capitalize on the nation’s defense priorities, making it a compelling investment opportunity for those seeking a solid income investment with growth potential.
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