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What Should Investors Know About Lockheed Martin Corporation's (NYSE:LMT) Earnings Trend?

Simply Wall St

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Lockheed Martin Corporation's (NYSE:LMT) released its most recent earnings update in December 2018, which suggested that the company experienced a substantial tailwind, more than doubling its earnings from the prior year. Today I want to provide a brief commentary on how market analysts view Lockheed Martin's earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

See our latest analysis for Lockheed Martin

Market analysts' prospects for next year seems rather subdued, with earnings increasing by a single digit 9.9%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 33% compared to today’s earnings, and finally hitting US$7.2b by 2022.

NYSE:LMT Past and Future Earnings, March 31st 2019

Even though it’s helpful to understand the rate of growth each year relative to today’s level, it may be more beneficial estimating the rate at which the business is rising or falling every year, on average. The advantage of this approach is that it ignores near term flucuations and accounts for the overarching direction of Lockheed Martin's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 10.0%. This means that, we can expect Lockheed Martin will grow its earnings by 10.0% every year for the next few years.

Next Steps:

For Lockheed Martin, I've put together three essential aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is LMT worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether LMT is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of LMT? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.