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On Wednesday, Seaport Global Securities updated its outlook on Lockheed Martin (NYSE:LMT) shares, raising the price target to $670 from $577 while maintaining a Buy rating. The firm's analysis suggests a cautious stance in the near term, anticipating that the company's third-quarter financial results might not meet the market consensus. This expectation is partly due to Lockheed Martin not securing the F-35 lot 18 contract, which affects revenue and free cash flow (FCF).
The analyst noted that although investor sentiment towards Lockheed Martin has become more positive since June, it appears to be leveling off. The company's performance in the upcoming third-quarter earnings report is expected to be impacted by the absence of the F-35 lot 18 bookings. Moreover, current government spending levels do not seem to support an optimistic outlook that would surpass market expectations.
Despite these concerns, Lockheed Martin had previously increased its guidance in the second quarter of 2024, and the analyst anticipates that the company will reiterate its operational guidance for the year. A significant potential positive could arise if Lockheed Martin opts to adjust its 2024 FCF guidance to address or eliminate future pension liabilities, which could enhance FCF in 2025 and 2026.
The analyst expects some investors to sell their shares following the third-quarter earnings release. However, any decision by Lockheed Martin to reduce its long-term pension liabilities could be seen as a substantial positive development for the stock. Based on the overall analysis, Seaport Global Securities remains positive on Lockheed Martin and has increased the price target to reflect this outlook.
In other recent news, Lockheed Martin has been the subject of several significant developments. RBC Capital Markets and Deutsche Bank have both raised their price targets for Lockheed Martin, citing positive prospects for the company's earnings and revenue. The company's recent boost in its buyback authorization by $3 billion and a potential pre-funding of its pension are seen as positive indicators for future performance.
United Launch Alliance, a collaboration between Boeing (NYSE:BA) and Lockheed Martin, announced the successful second launch of its Vulcan rocket, marking a significant step towards Pentagon mission certification. Furthermore, Lockheed Martin was selected by NASA to construct next-generation GeoXO Lightning Mapper instruments for NOAA's future weather satellites, a contract valued at around $297 million.
Global defense contractors, including Lockheed Martin, are being drawn to the Philippines' military modernization program, which has committed $35 billion over the next decade to enhance its military capabilities.
Meanwhile, U.S. Senator Elizabeth Warren initiated an inquiry into the defense industry's resistance to a proposed 'right to repair' bill that could impact major defense contractors like Lockheed Martin. These are among the recent developments involving Lockheed Martin.
InvestingPro Insights
Lockheed Martin's financial metrics and market performance align with Seaport Global Securities' optimistic outlook, despite near-term caution. The company's revenue growth of 5.45% over the last twelve months and 8.56% in Q2 2024 suggests steady expansion, even without the F-35 lot 18 contract.
InvestingPro Tips highlight Lockheed Martin's strong dividend history, having raised dividends for 22 consecutive years and maintained payments for 41 years. This consistent shareholder return policy aligns with the company's stable financial position, operating with a moderate level of debt.
The stock's recent performance is noteworthy, with a 32.84% return over the past three months and trading near its 52-week high. This momentum supports Seaport's increased price target, although the tip suggesting the stock is in overbought territory based on RSI indicates potential short-term volatility.
For investors seeking a deeper understanding of Lockheed Martin's financial health and market position, InvestingPro offers 13 additional tips, providing a comprehensive analysis to inform investment decisions.
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