Will Lockheed Martin (LMT) Earnings Succumb to Tight Budget?

Zacks

Lockheed Martin Corporation (LMT) is slated to release its second quarter 2014 financial results before the market bell on Jul 22, 2014. The company posted a positive earnings surprise of 13.89% in the preceding quarter. Lockheed currently has a Zacks Rank #2 (Buy). Let’s see how things are shaping up prior to this announcement.

Factors to Consider this Quarter

Lockheed Martin, the largest U.S. aerospace and defense contractor, continued to receive a steady stream of orders from the different U.S. defense departments.

More than 80% of Lockheed's total revenues are derived from the U.S. government.  With the U.S. military budget increasingly under pressure, the prospects of this defense major look a little jaded.

In spite of the mature markets and unfavorable trends, foreign military sales continue to keep the hope alive for defense contractors. Lockheed’s engagement in the biggest defense program, the F-35, will also provide steady revenues going forward .

Earnings Whispers

Our proven model does not conclusively show that Lockheed Martin will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Negative ESP:  This is because the Most Accurate estimate stands at $2.61 while the Zacks Consensus Estimate is $2.66 per share, resulting in -1.88% ESP.

Zacks Rank #2: Lockheed’s Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise.

Other Stocks to Consider

Here are some companies in the aerospace and defense space having the right combination of elements to post an earnings beat this quarter.

Northrop Grumman Corporation (NOC) has an earnings ESP of +1.36% and carries a Zacks Rank #2 (Buy).

The Boeing Company (BA) has an earnings ESP of +1.00% and carries a Zacks Rank #3 (Hold).

General Dynamics Corp. (GD) has an earnings ESP of +1.14% and carries a Zacks Rank #3 (Hold).

Read the Full Research Report on NOC
Read the Full Research Report on BA
Read the Full Research Report on GD
Read the Full Research Report on LMT


Zacks Investment Research

View Comments (0)