Will Poor Sales Hurt Lockheed (LMT) This Earnings Season?
Lockheed Martin Corporation LMT is slated to release first-quarter 2022 results on Apr 19, before the opening bell.
Lower sales volume, particularly from Black Hawk as well as Special Operations Forces Global Logistics Support Services (SOF GLSS), is expected to have affected the top-line performance of the company in the soon-to-be-reported quarter. Also, supply chain disruption might have had some impact on Lockheed’s bottom-line performance.
Let's see how things have shaped up prior to this announcement.
Aeronautics Remains a Key Catalyst
The Aeronautics segment, which primarily manufactures advanced, combat-proven jets and comprises almost 40% of the company’s top line, is expected to have once again acted as a major growth catalyst in the soon-to-be-reported quarter.
Notably, Lockheed Martin boasts a history of delivering a significant number of military jets every quarter. We expect a similar trend to have prevailed in the first quarter, which, along with solid production volume for jets like the F-35, is expected to have once again boosted top-line growth of the Aeronautics business division.
The Zacks Consensus Estimate for this unit’s revenues for the first quarter stands at $6,553 million, indicating a 2.6% improvement from the prior-year reported figure.
Lockheed Martin Corporation Price and EPS Surprise
Lockheed Martin Corporation price-eps-surprise | Lockheed Martin Corporation Quote
Impact of MFC & RMS’ Performance
Lockheed Martin’s Missiles and Fire Control (MFC) segment provides critical missile defense support to the United States and foreign allies. From this segment, production volume for tactical and strike missile programs is expected to have boosted the MFC unit’s top-line performance in the first quarter. However, a decrease in Special Operations Forces Global Logistics Support Services (SOF GLSS) volume at MFC due to the withdrawal of U.S. forces from Afghanistan might have caused this segment to deliver lower revenues in first-quarter 2022 compared with last year’s first quarter.
The Zacks Consensus Estimate for MFC segment revenues is currently pegged at $2,651 million, implying a 3.6% decline from the year-ago reported figure.
In its Rotary and Mission Systems (RMS) segment, which manufactures combat helicopters, the lower volume expected for the Black Hawk helicopter, is projected to have a revenue decline of $300 million in 2022. A partial impact of this revenue decline must have impacted RMS’ first-quarter top-line performance.
The Zacks Consensus Estimate for RMS segment revenues is currently pegged at $3,804 million, implying a 7.4% decline from the year-ago reported figure.
Q1 Expectations
Considering the aforementioned developments, the sales decline expected at two major segments of Lockheed Martin must have outweighed the sales improvement in the Aeronautics segment. So, the overall sales impact might have been poor.
The Zacks Consensus Estimate for the company’s first-quarter revenues stands at $15.62 billion, indicating a 3.9% decrease from the year-earlier reported figure.
Owing to supply chain disruption that has been impacting Lockheed for quite some time now, this defense giant will have to make an accelerated $2.2 billion in payments during 2022, which will have an adverse impact on the first-quarter bottom-line performance.
Moreover, with the Black Hawk program being a notable product line leading to accretive margins for LMT, lower volumes from it must have lowered margin in the first quarter, thereby hurting its earnings. On the other hand, increased expenses in relation to ramped-up production of Ch-53K helicopters might have also impacted the company’s first-quarter earnings.
The Zacks Consensus Estimate for the defense giant’s first-quarter earnings is pegged at $6.22 per share, suggesting a deterioration of 5.2% from the prior-year reported number.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for Lockheed this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.
Lockheed has an Earnings ESP of -0.64% and a Zacks Rank #3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
A Stock to Consider
Here is a defense company you may want to consider as it has the right combination of elements to post an earnings beat this season:
General Dynamics GD has an Earnings ESP of +0.54% and a Zacks Rank #3. GD has a four-quarter average negative earnings surprise of 3.72%.
The Zacks Consensus Estimate for General Dynamics’ first quarter is pegged at $2.48 per share, reflecting a decline from $2.53 60 days ago. GD boasts a long-term earnings growth rate of 9.6%.
Other Defense Earnings Coming Up
Northrop Grumman NOC is scheduled to release its first-quarter results on Apr 28. It holds a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
NOC delivered a four-quarter average earnings surprise of 11.05%. The Zacks Consensus Estimate for Northrop’s first-quarter earnings, pegged at $5.94, has remained unchanged over the past 30 days. NOC boasts a long-term earnings growth rate of 6.2%.
Textron TXT is scheduled to release its first-quarter results on Apr 28. It holds a Zacks Rank #3.
The Zacks Consensus Estimate for Textron’s first-quarter earnings, pegged at 74 cents, has declined 3.9% over the past 30 days. TXT boasts a long-term earnings growth rate of 11.8%.
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