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Lockheed Martin (LMT) Beats on Q1 Earnings, Raises '19 View

Zacks Equity Research

Lockheed Martin Corp. LMT reported first-quarter 2019 earnings of $5.99 per share, which surpassed the Zacks Consensus Estimate of $4.29 by 39.6%. The bottom line also improved 49% from the year-ago quarter’s $4.02. This year-over-year upside can be attributed to solid sales and operating profit.

Operational Highlights

In the reported quarter, net sales amounted to $14.34 billion, which outshined the Zacks Consensus Estimate of $12.65 billion by 13.4%. The reported figure also increased 23.2% from $11.64 billion a year ago. Notably, all segments registered year-over-year growth in sales.

Lockheed Martin Corporation Price, Consensus and EPS Surprise

Lockheed Martin Corporation Price, Consensus and EPS Surprise | Lockheed Martin Corporation Quote

Backlog

Lockheed Martin ended the first quarter (on Mar 31, 2019) with $133.5 billion in backlog, up 2.3% from $130.5 billion at the end of 2018. Of this, the Aeronautics segment accounted for $52.34 billion, while Rotary and Mission Systems contributed $31.33 billion. Also, $26.59 billion stemmed from Space Systems and $23.21 billion from the Missiles and Fire Control segment.

Segmental Performance

Aeronautics: Sales increased 27% year over year to $5.58 billion, primarily driven by higher net sales from the F-35 and F-22 programs. Also, higher sales from classified development activities owing to increased volume contributed to sales growth at this unit.

While operating profit improved 23% year over year to $585 million, operating margin contracted 30 basis points (bps) to 10.5%.

Missiles and Fire Control: Quarterly sales surged 40% year over year to $2.35 billion owing to higher sales from tactical and strike missiles programs as well as integrated air and missile defense programs. Also, higher sales from sensors and global sustainment programs contributed to this unit’s top-line growth.

While operating profit increased 60% year over year to $417 million, operating margin expanded 210 bps to 17.7%.

Rotary and Mission Systems: Quarterly sales of $3.76 billion increased 17% from the prior-year quarter on account of higher sales from integrated warfare systems and sensors programs as well as the Sikorsky helicopter programs.

Operating profit improved 22% year over year to $379 million, while operating margin expanded 50 bps to 10.1%.

Space Systems: Sales rose 13% year over year to about $2.64 billion in the first quarter. The uptick was driven by higher net sales from government satellite, Global Positioning System (GPS) III, government satellite services, the Advanced Extremely High Frequency (AEHF) program and the Orion program.

Operating profit increased 27% to $334 million and operating margin expanded 140 bps to 12.7% in the reported quarter.

Financial Condition

Lockheed Martin’s cash and cash equivalents totaled $0.99 billion as of Mar 31, 2019, compared with $0.77 billion at the end of 2018. Long-term debt summed $12.62 billion, slightly higher than the prior year-end level of $12.60 billion.

Cash from operations at the end of first-quarter 2019 amounted to $1.66 billion compared with $0.63 billion a year ago.

During the reported quarter, the company repurchased 1 million shares for $281 million compared with the buyback of 0.9 million shares for $300 million a year ago.

Lockheed Martin paid dividends worth $638 million to its shareholders in the first quarter compared with the year-ago figure of $586 million.

Guidance

For 2019, Lockheed Martin raised its financial guidance. The company currently expects to generate revenues of $56.75-$58.25 billion compared with $55.75-$57.25 billion projected earlier. The Zacks Consensus Estimate for full-year revenues, pegged at $56.82 billion, lies near the lower end of the company’s updated guidance.

Earnings per share for 2019 are anticipated to be in the $20.05-$20.35 range compared with $19.15-$19.45 guided earlier. The Zacks Consensus Estimate for the company’s full-year earnings, pegged at $19.46, lies below the company’s updated guidance.

Additionally, in 2019, the company expects to generate cash from operations of more than $7.5 billion compared with the earlier projection of generating more than $7.4 billion.

Zacks Rank

Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are some companies in the Aerospace sector that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Raytheon Company RTN is expected to report first-quarter 2019 results on Apr 25. The company has an Earnings ESP of +0.54% and a Zacks Rank #2 (Buy). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

General Dynamics Corp. GD is anticipated to report first-quarter 2019 results on Apr 24. The company has an Earnings ESP of +1.35% and a Zacks Rank #3.

Huntington Ingalls Industries, Inc. HII is expected to report first-quarter 2019 results on May 2. The company has an Earnings ESP of +1.93% and a Zacks Rank #3.

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