Lockheed Martin was established in March 1995 with amalgamation of Lockheed Corporation with Martin Marietta and is headquartered in Bethesda, Md. The company excels in production of fighter aircrafts, satellites, transport aircrafts, ATC systems, radars, Atlas launch vehicles, ballistic missiles, spacecrafts, munitions and missile defense elements and had reported revenue worth $45.8 billion in the year 2010.
With a global workforce of around 140,000 people, Lockheed Martin has become the world’s largest defense contractors dealing in four major business segments including aeronautics, electronic systems, information systems & global solutions and space systems.
The company has been among the top performing stocks since 9/11 terrorist attacks on World Trade Center in 2001 following which defense budgets of various countries including the United States expanded manifolds.
The continuous drive of spending hefty amounts on the combat and the defense programs and products, the future shows a rosy picture for companies like Lockheed Martin.
Lockheed Martin has a competitive edge over its peers and is the largest defense contractor for the government which is spending about $925 billion annually.
In the post-9/11 attacks in Manhattan area, Lockheed Martin further augmented its space by acquiring QTC Holdings, which was the biggest provider of medical evaluation services to the American government offices.
Recently, the U.S. and other governments have been under tremendous pressure for making huge cuts on defense spending, but Lockheed Martin is well prepared to weather the storm in that scenario as after acquiring QTC Holdings in 2011 they have diversified their reach by getting into the medical services providers’ business.
If we take a look at the company’s market capitalization, Lockheed Martin has huge market capitalization worth $28 billion and had recorded huge sales of $46.5 billion only last year. At present, its ROE is at a considerably high level of 118.59% while its ROI is at 10.78% when compared with an industry average of 21.3% and 4.9%, respectively.
Despite of the global downturn, Lockheed Martin is trading near its 52-week top which means it has an extremely low P/E of 11.41 as compared to an industry average of 208.8 and 26.33, respectively.
As per the U.S. stock markets experts, Lockheed Martin is considered as one of the cheaper stocks in terms of current valuation among American equities as it has a healthy earning per share (EPS) of around $7.82 beside low beta of 0.91, showing a higher level of stability.
The scrip of Lockheed Martin has the potential to beat market expectations as it has done in the past; therefore we always find analysts making higher forecasts.
Let’s compare Lockheed Martin with its number-one competitor Boeing (BA). Boeing has a huge market capitalization worth $55.4 billion with an earning worth about $69 billion and an annual growth rate of around 18% but when we compare it with Lockheed Martin, it falls short of operating margin as it has a relatively meager operating margin of 8.06% against 8.14% for LMT.
Another factor that separates Lockheed Martin from its biggest rival is Boeing’s EPS which is on the lower side at $5.34 as compared to $7.82 for the LMIT while its P/E of 13.92 is also higher than Lockheed Martin.
The future doesn’t paint a rosy picture for Boeing as the company has been hit by the global downturn which resulted in cuts on both aviation and defense sides. Boeing has recently announced shutting down its Wichita facility by 2014 which reflects the pressure of global recession on the company.
Despite Lockheed Martin’s advantages over its competitor Boeing, all is not green for the top U.S. defense products manufacturing company as its F-35 fighter aircraft project may prove a risk to its future earnings. Although the Lockheed Martin has received billions of dollars worth contracts from the government as well as its allies, the rampant delays in its manufacturing and test has put a question mark on the timely delivery of the aircrafts, therefore I would advise the investors who have exposure in Lockheed Martin to keep a close look at the company’s F-35 fighter aircraft project.
Lockheed Martin had good news to break last week for its investors when it announced it had received a five-year contract worth $1.05 billion for supply of over 200 digital cockpits for Navy MH-60R "Romeo" and MH-60S "Sierra" helicopters which also include sensors and integrated mission systems.
Keeping a close look at the production of “Romeo” and “Sierra” helicopters, investors can make up their minds for a longer association with the LMT scrip.
During the course of past 52 weeks, the LMT stock price has hovered around $66.36 and $91.61 and closed 0.21% down at $90.15 on Thursday.
At current rate and amid bullish signs, Lockheed Martin is all set to pay huge dividends to its stakeholders, and investors should keep their faith alive in the scrip for a medium-to-long term. During these times of international financial meltdown, Lockheed Martin has been able to post stable growth which is a positive development for the investors who have exposure in its scrip, and with the company getting commercial and military sector contracts it has the potential to catch more eyes in the days to come. At the current price, I would strongly recommend investors go for Lockheed Martin as the U.S. government’s increasing cooperation with its allies in the Washington-led War on Terror opens new vistas of progress for the world’s largest defense equipment producer.