Why Is Lockheed (LMT) Down 1% Since Last Earnings Report?
It has been about a month since the last earnings report for Lockheed Martin (LMT). Shares have lost about 1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Lockheed due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Lockheed Q4 Earnings Beat Estimates, Sales Decline Y/Y
Lockheed Martin reported fourth-quarter 2023 adjusted earnings of $7.90 per share, which beat the Zacks Consensus Estimate of $7.26 by 8.8%. The bottom line also improved 1.4% from the year-ago quarter's recorded figure.
The company reported GAAP earnings of $7.58 per share compared with $7.40 in the prior-year period.
Lockheed reported 2023 adjusted earnings of $27.82 per share, which beat the Zacks Consensus Estimate of $27.24 by 2.1%. The bottom line also rose 2.2% from the year-ago quarter's recorded figure.
Operational Highlights
Net sales were $18.87 billion in the reported quarter, which surpassed the Zacks Consensus Estimate of $17.98 billion by 4.9%. The top line, however, decreased 0.6% from $18.99 billion reported in the year-ago quarter.
Net sales were $67.57 billion in 2023, which beat the Zacks Consensus Estimate of $66.68 billion by 1.3%. The top line also rose 2.4% from $65.98 billion reported in the year-ago quarter.
Backlog
Lockheed’s backlog as of Dec 31, 2023, was $160.57 billion compared with $156.03 billion at the end of third-quarter 2023.
Our model projected a backlog worth $169.08 billion for the fourth quarter of 2023.
The Aeronautics segment accounted for $60.16 billion of this amount, while Rotary and Mission Systems contributed $37.73 billion. The Missiles and Fire Control, and the Space Systems segments contributed $32.23 billion and $30.46 billion, respectively.
Segmental Performance
Aeronautics: Sales decreased 0.3% year over year to $7.61 billion on account of lower sales from the F-35 program due to lower volume from production contracts.
The segment’s operating profit deteriorated 6.7% year over year to $761 million. The operating margin also contracted 70 basis points (bps) to 10%.
Missiles and Fire Control: Quarterly sales dropped 3.5% year over year to $3.17 billion. This was on account of lower net sales from integrated air and missile defense programs, primarily due to supplier cost timing on PAC-3 missiles.
The segment’s operating profit decreased 12.4% year over year to $395 million, while the operating margin of 12.5% deteriorated 120 bps from the year-ago quarter’s level.
Space Systems: Sales increased 3.5% year over year to $3.38 billion due to higher sales from strategic and missile defense programs, driven by a ramp-up in the Next Generation Interceptor (NGI) development program.
The segment’s operating profit improved 31.2% to $307 million. The operating margin expanded 190 bps to 9.2% in the quarter under review.
Rotary and Mission Systems: Quarterly revenues declined 2% to $4.71 billion on a year-over-year basis. This was primarily driven by lower sales from integrated warfare systems and sensors programs as well as from training and logistics solutions programs.
The segment’s operating profit rose 2% to $579 million in the reported quarter. The operating margin expanded 50 bps to 12.3% in the same time frame.
Financial Condition
Lockheed’s cash and cash equivalents totaled $1.44 billion at the end of 2023 compared with $2.55 billion at the end of 2022.
Cash from operating activities amounted to $7.92 billion during 2023 compared with $7.80 billion in the year-ago period.
Long-term debt as of Dec 31, 2023, totaled $17.29 billion, up from $15.43 billion as of Dec 31, 2022.
2024 Guidance
Lockheed has provided its financial guidance for 2024. The company expects revenues in the range of $68.50-$70.00 billion. The Zacks Consensus Estimate for revenues is pegged at $68.59 billion, which lies lower than the mid-point of the company’s guided range.
LMT expects to generate earnings per share (EPS) in the range of $25.65-$26.35. The Zacks Consensus Estimate for the company’s full-year EPS is pinned at $26.70, higher than the company’s guided range.
Lockheed expects to generate free cash flow in the range of $6.00-$6.30 billion during 2024.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Lockheed has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lockheed has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
