While the Lockheed Martin top line remains under pressure, solid segment margin performance continues to outstrip expectations. The company officials said they have increased their earnings-per-share estimates for 2014, 2015 and 2016 by 35 cents, 55 cents and 95 cents, respectively, to $11.25, $11.70 and $12.85, respectively, reflecting the new pension-income outlook. Lockheed Martin's capital deployment was put on temporary hold to evaluate pension implications; however, repurchases are expected to return in the third quarter. Pension income recovery is being reset materially higher over the next few years, which has boosted our EPS estimates. We have also bumped our price target higher, reflecting the higher EPS estimates.
Lockheed Martin reported a strong second quarter with sales of $11.3 billion and EPS of $2.76 versus Wall Street expectations of $11.1 billion and $2.66, respectively, and our estimate of $11.1 billion and $2.64, respectively. The company raised 2014 EPS guidance to $10.85-$11.15 from $10.50-$10.80 with sales guidance maintained in the range of $41.5 billion-$43.0 billion. The Street is in print for 2014 sales at $44.8 billion and EPS of $10.94, and we are at $44.5 billion and $11.25 (up 35 cents), respectively. Lockheed Martin pension income was increased by $100 million for 2014 to $445 million, and it's expected to hit $900 million (up $250 million) in 2015 and $1.4 billion in 2016. Cash from operations in 2014 is expected to be equal or more than $4.8 billion (up $100 million), which should support continued robust share buybacks and dividends.
- Warning! GuruFocus has detected 5 Warning Signs with LMT. Click here to check it out.
- LMT 15-Year Financial Data
- The intrinsic value of LMT
- Peter Lynch Chart of LMT
After lifting more than 4.5 million pounds of cargo and conducting thousands of delivery missions for the U.S. Marine Corps, the Lockheed Martin and Kaman Aerospace Corporation K-MAX cargo unmanned aircraft system (UAS) has returned to the United States following a nearly three-year deployment in Afghanistan.
In 2011, K-MAX became the first unmanned helicopter to deliver cargo in theater for the U.S. Marine Corps. As troops were frequent targets of improvised explosive devices and insurgent attacks, the K-MAX answered the call to reduce the number of truck resupply convoys and their troop escorts to protect soldiers on the ground.
Manufactured by Kaman Aerospace Corporation and outfitted with its mission package of systems and sensors, the heavy-lifting K-MAX UAS is a transformational technology that can lift 6,000 pounds of cargo at sea level. Capable of flying delivery missions day and night, K-MAX can reach remote locations without risking a life.
In the second quarter, Lockheed Martin repurchased 800,000 shares for $124 million versus 7.0 million shares for $1.1 billion in the first quarter, and 4.5 million shares in the second quarter for $465 million. During the quarter, Lockheed Martin ceased discretionary share repurchases while it was considering amendments to certain of its defined benefit pension plans. Lockheed Martin stated its cash-deployment strategy has not changed, and accordingly, Lockheed Martin anticipates resuming discretionary share repurchases in the third quarter. After incorporating a resumed repurchase program in the second half, Lockheed Martin expects cash levels to be at 2013 levels ($2.6 billion) by the end of 2014. I would thus encourage the investors to go for the LMT stock.