On Jun 17, 2013, the shares of Lockheed Martin Corp. (LMT) hit a 52-week high of $109.25. The adjusted closing price was $108.27 per share, a 2.7% jump from the beginning of the month. The company has been performing well, registering positive earnings surprises in three of the last four quarters, with an average beat of 16.56%.
It is not only about posting earnings surprises but the work that goes on in the background, which ensures a steady performance from the company quarter after quarter. One of the basic parameters is innovation, which allows Lockheed to stay ahead in the race. For example, the Orion multi-purpose crew vehicle from LMT is a potential game changer in U.S. space exploration.
A slew of foreign military sales contracts along with training programs ensure a steady stream of revenues for the company. Early in June Lockheed received contracts from Canada, Saudi Arbia and Finland.
Apart from defense, Lockheed’s expertise extends to other fields. Recently, Lockheed agreed to assist the Chinese authority in manufacturing Generation III nuclear power plant reactors. The company will also ensure operational safety at the nuclear power plant.
So, the threat of sequestration notwithstanding, the diverse product offerings, strong program execution and cost reduction measures will help the company to sustain its profitability. This defense behemoth exited the quarter with a total backlog of $77.9 billion.
The strong financial performance of the company allows it to reward its shareholders through share buybacks and payment of regular dividends.
The present valuation reflects that the company’s shares are trading at a discount to its peers. The shares of Lockheed Martin currently trade at 12.05x 12-month forward earnings, a 16.4% discount to the peer group average of 14.41x. Its price-to-sales ratio of 0.74 is at a 10.84% discount to the peer group average of 0.83.
Lockheed currently retains a Zacks Rank #3 (Hold). Other companies in the industry worth considering are Erickson Air-Crane Inc. (EAC), Alliant Techsystems Inc. (ATK) and Wesco Aircraft Holdings Inc. (WAIR). Erickson Air-Crane presently has a Zacks Rank #1 (Strong Buy) while Alliant Techsystems and Wesco Aircraft Holdings hold a Zacks Rank # 2 (Buy).
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