Key takeaways:
Current Price: $387 Price Target: $469
Position Size: 2.98% 1-year Performance: +4%
Lockheed released another good quarter, beating on the top and bottom line, and raising guidance for the year by 1% for revenue and 2% for EPS (all as usual).
- Revenue growth of +4% and segment operating margin 10.8%
- 2021 revenue guidance of $68B at the mid-point
- Cash flow from ops was $1.75B, guidance for the year raised by $600M to be at or above $8.9B
- Backlog still solid at $147B but flat quarter/quarter
- Book to bill 1.05X
- Balance sheet remains good with leverage of 0.9X and cash position of $2.9B
- The company repurchased $1B of stock during the quarter (vs. none last quarter)
- $4.4B purchase of Aerojet (announced in 4Q) will most likely not require new debt as FCF and cash on hand offer plenty of liquidity
- Aerojet offers opportunities in the growing space & hypersonic sector, a priority in the defense budget
- LMT has exposure to key defense programs such as the F-35, missile and space, all growing areas within defense spending, although the defense budget is likely to decelerate over the next few years
Sales per segment were as follow:
- Aeronautic +0.3%, with F-16 and classified contracts growth offset by lower F-35 development contracts and F-22
- Missiles and Fire Control +5%, driven by Patriot programs
- Rotary and Mission Systems +9.6% driven by an international pilot training system and Sikorsky helicopters
- Space Systems +3.4% driven by the Atomic Weapons Establishment and commercial civil space programs
LMT Thesis:
· Lockheed Martin is a primary beneficiary from the replacement cycle for aging military aircraft and ships
· Excellent management team focused on returning capital to shareholders
· Strong cash flow and financial position
[category earnings] [tag LMT] $LMT.US
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109