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On Thursday, RBC Capital Markets adjusted its stance on Lockheed Martin (NYSE:LMT) stock, downgrading the company from ’Outperform’ to ’Sector Perform’ and reducing the price target to $480 from the previous $550. The downgrade comes amidst concerns over the defense contractor’s growth prospects and potential headwinds. According to InvestingPro data, five analysts have recently revised their earnings expectations downward, while the stock trades at $445.17, near its 52-week low of $419.70.
Lockheed Martin, known for its F-35 fighter jets, has been facing what analysts at RBC Capital call "greater headline risk" for its international sales. While they do not foresee actual order cancellations, there is a belief that the company may encounter increased scrutiny and pressure on defense budgets within the United States. Despite these challenges, InvestingPro highlights the company’s strong dividend track record, having maintained payments for 42 consecutive years with a current yield of 2.97%.
The recent loss of the Next (LON:NXT) Generation Air Dominance (NGAD) program has also sparked questions about Lockheed Martin’s long-term growth trajectory. According to RBC Capital, this development, along with a lack of near-term catalysts, may dampen investor sentiment towards the company’s stock.
Despite acknowledging that Lockheed Martin’s current valuation appears attractive, RBC Capital suggests that the factors leading to the downgrade could continue to affect the stock’s performance. The firm emphasizes that these issues may linger and impact investor outlook, prompting the reassessment of Lockheed Martin’s stock to a ’Sector Perform’ rating. InvestingPro’s Fair Value analysis suggests the stock is slightly undervalued, with the company maintaining solid financials including a P/E ratio of 19.88 and revenue growth of 5.14% over the last twelve months.
The revised price target of $480 reflects a more cautious view on the company’s future financial performance in light of the challenges identified by RBC Capital Markets.
In other recent news, Lockheed Martin has been actively involved in several significant developments. The company, in collaboration with Boeing (NYSE:BA), achieved certification for the Vulcan rocket to launch national security satellites for the US Department of Defense. This certification positions the United Launch Alliance, a joint venture of Boeing and Lockheed Martin, as one of only two certified providers for such missions. Meanwhile, Lockheed Martin’s Aegis Combat System successfully demonstrated its capability to counter hypersonic threats during a recent test, showcasing its adaptability in missile defense.
On the financial front, Truist Securities maintained a Buy rating for Lockheed Martin despite the company’s loss in the Next Generation Air Dominance contract to Boeing. However, Melius Research downgraded Lockheed Martin from Buy to Hold, citing increased competition and geopolitical shifts that could impact future growth prospects. Additionally, discussions between Turkey’s defense ministry and Lockheed Martin regarding a potential $23 billion sale of F-16 fighter jets remain ongoing. These recent developments highlight the dynamic landscape Lockheed Martin navigates in both its operational and financial endeavors.
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