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Why Are Lockheed Martin Shares Trending Lower?

Story Highlights

Lockheed Martin reported weaker-than-expected Q2 results, missing both earnings and revenue estimates due to weak performance across all four segments.

Shares of Lockheed Martin (LMT) were down 3.5% during pre-market trading today after the U.S.-based aerospace and defense major reported lower-than-expected Q2 results.

Adding to the investors’ disappointment was the announcement of a cut in the FY2022 outlook much below analysts’ expectations.

LMT’s Q2 Miss

Adjusted earnings of $6.32 per share decreased 1.6% year-over-year and fell short of analysts’ expectations of $6.39 per share. The company reported earnings of $6.42 per share for the prior-year period.

Net sales declined 9.3% year-over-year to $15.45 billion, missing consensus estimates of $16 billion.

Segment-wise, Missiles and Fire Control net sales declined 6.7% year-over-year to $2.75 billion, while Aeronautics net sales, Rotary and Mission Systems net sales, and Space net sales declined 12%, 5.4%, and 11%, respectively.

Positively, however, the company returned $1.1 billion to shareholders in the form of share repurchases and dividends during the quarter.

Reduced FY2022 Outlook

Based on current results and future expectations, management trimmed financial guidance for FY2022, but remains confident in achieving its previously guided outlook for segment operating profit and cashflows.

The company now forecasts adjusted earnings of $21.55 per share, much lower than the previously guided earnings of $26.70 per share and the consensus estimate of $26.35 per share.

Revenues are forecast to be in the range of $65.25 billion, lower than the prior outlook and the consensus estimate of $66 billion.

LMT CEO’s Comments

Lockheed Martin CEO, James Taiclet, commented, “Although revenue in the period was affected by supply chain impacts and the timing of customer contract negotiations, our cost management initiatives resulted in margin expansion.”

He further added, “Moreover, our robust cash generation also continues to provide the resources to invest in building the foundation for future revenue and margin growth opportunities through our classified program capex projects, hypersonics development efforts, and our 21st Century Security and internal Digital Transformation initiatives.”

Wall Street Is Cautious about LMT

The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on six Buys and six Holds. The average Lockheed Martin price target of $501.92 implies 29.6% upside potential to current levels.

Perfect Smart Score for Lockheed

LMT scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

Bottom-Line

While the rest of the world markets are battered by numerous challenges, down 20% year-to-date, LMT shares are up almost 10%, massively beating the benchmark performance.

The hike in the defense budget the world over will continue to support the stock price performance despite the near-time hitch implied in the reduced outlook.

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