Lockheed Martin Delivers Strong Q3, Adjusts Full-Year Outlook Upwards

Lockheed Martin (NYSE: LMT) has unveiled its Q3 2024 results, surpassing some expectations with revenues and earnings slightly higher than anticipated. The company reported revenue of $17.1 billion and adjusted earnings of $6.84 per share, compared to previous estimates of $17.0 billion and $6.50, respectively. This article analyzes the key insights from Lockheed Martin’s latest results, stock valuation, and overall performance.

A Closer Look at Lockheed Martin’s Q3 Performance

During Q3, Lockheed Martin managed to achieve revenues of $17.1 billion, reflecting a modest year-over-year increase of 1%. When examining specific segments, Aeronautics sales experienced a 3% drop, primarily due to lower production volumes of the F-35 aircraft. The Missiles and Fire Control segment, on the other hand, saw an 8% rise driven by increased output for its Guided Multiple Launch Rocket Systems (GMLRS) and Long Range Anti-Ship Missile (LRASM) programs. Additionally, the Rotary and Mission Systems segment grew by 6%, fueled by higher demand for integrated warfare systems and sensors. However, the Space segment revenue fell by 1% due to decreased activity in the Orion program.

Lockheed Martin’s operating margin increased by 40 basis points to 12.5% in Q3. Alongside a 4.6% reduction in total shares outstanding, this led to a bottom line of $6.84, marking a 1% year-over-year growth. The company also updated its full-year outlook, now projecting sales of $71.25 billion and earnings of $26.65 per share, a notable adjustment from its previous guidance of $71.0 billion in sales and $26.35 in earnings.

Implications for LMT Stock

Even though Lockheed Martin’s third-quarter results exceeded some predictions, its $17.1 billion revenue fell short of the consensus estimate of $17.4 billion. As a result, the stock experienced a 6% decline following the announcement. Despite this drop, the significant earnings beat and an improved full-year outlook suggest that the decrease in LMT stock may not be entirely warranted. It’s worth noting that prior to the earnings report, LMT stock was somewhat overvalued, trading at a lifetime high above $615.

We estimate Lockheed Martin’s fair valuation to be $572 per share, aligning with its current market price. This projection is based on a price-to-earnings (P/E) multiple of 21x for LMT and anticipated earnings of $26.65 on a per-share, adjusted basis for the full year 2024. Both the valuation metric and earnings estimate have been raised in light of the latest results. The P/E multiple of 21x also exceeds the average multiple of 17x the stock has maintained over the past five years. Given the current geopolitical climate, a slight uptick in Lockheed Martin’s valuation appears justified.

In terms of year-to-date performance, LMT stock has risen 29%, outpacing the S&P 500’s 23% gain. However, over the last three years, LMT stock has been quite volatile, mirroring the fluctuations of the S&P 500. In contrast, the Trefis High Quality (HQ) Portfolio, which consists of 30 select stocks, has consistently outperformed the S&P 500 each year during the same time frame. This portfolio presents a lower-risk investment option, providing steadier returns compared to the broader market.

While LMT stock appears fairly priced, examining how Lockheed Martin’s Peers perform on key metrics can provide additional context for investors. For more comparisons across different industries, visit Peer Comparisons.

[1] Returns as of 10/23/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.