Defense sector companies that hold multi-billion dollar contracts with the U.S. government are operating contingency plans after Day 3 of a partial government shutdown.
But, as of Monday morning, company stocks had little change as a result of the inactivity in Washington. The government’s partial shutdown took hold on Friday when lawmakers couldn’t come to an agreement over a comprehensive spending plan. Talks are currently underway between lawmakers who are trying to seal a deal today, making any disruption in the defense industry mostly temporary.
Early today, Lockheed Martin Corp. (LMT) released a statement saying the partial shutdown would “negatively impact” hundreds of ongoing government programs and tens of thousands of its employees across the U.S.
Other large defense contractors, including Boeing Co. (BA, Financial) and Raytheon Co., (RTN, Financial) are in similar straits as a result of a halt to government spending on federal contracts.
Lockheed operates the largest defense program in U.S. history, the F-35 Lightning II Fighter Jet, currently under construction at the company’s Fort Worth plant.
“The shutdown could result in costly schedule delays and breaks in production that will increase overall program costs and interrupt the delivery of critical equipment to our U.S. government customers,” the company said in its statement.
So far, the company has put in place some stop gap measures to minimize the impact of the partial shutdown and is keeping close tabs on what’s happening in Washington.
“We will continue to work closely with our customers to support essential programs and mitigate the impact to programs suspended during the shutdown,” the statement said.
Lockheed was trading at $330.91 a share, down 0.33%, on Monday.
The stock price is close to a 10-year high. The company has seen consistent earnings growth and its operating margin is expanding. It is also buoyed by consistent signals from Washington for boosting military and defense spending.
On GuruFocus, the company’s financial strength was 5 out of 10 and its profitability and growth was 7 out of 10.
It has a price-earnings (P/E) ratio of 26.62, or higher than 75% of its 130 or so global competitors. Its price-book (P/B) ratio is 45.37 and its price-sales (P/S) ratio is 1.95, or lower than 62 percent of its competitors.
It has a return-on-equity (ROE) of 209.22 or higher than 93% of the sector. Its return-on-assets (ROA) is 7.47 or 91% higher than the sector.
Several of guru investors have been drawn to Lockheed stock. Joel Greenblatt (Trades, Portfolio) (Trades, Porfolio) purchased shares of the company as of Sept. 30. He owns 119,471 shares of the company.
Other gurus include John Rogers (Trades, Portfolio) with 30,317 shares, Mario Gabelli (Trades, Portfolio) with over 6,600 shares and Ken Fisher (Trades, Portfolio) with over 4,500 shares.
Most of the gurus purchased the stock when it was valued between $250 and $310 a share, according to GuruFocus records.
According to the Peter Lynch chart, the stock is overvalued. Its median price is $184.90.
Boeing
Late Monday morning, Chicago-based Boeing was trading at $334.55 a share, down 0.94%.
It's ranked by GuruFocus 6 out of 10 for financial strength and 8 out of 10 for profitability and growth.
It has a P/E ratio of 31.10, higher than 53% of its competitors, a P/B of 185.77, a P/S ratio of 2.28, or lower than 59% of the industry.
It has an ROE of 1632.20, or 99% higher than the industry. And its ROA is 7.45, or 83% higher.
Its guru investors include the T. Rowe Price Equity Income Fund (Trades, Portfolio); Ken Fisher (Trades, Portfolio); Mario Gabelli (Trades, Portfolio); Tom Gayner (Trades, Portfolio) and Hotchkis & Wiley.
Raytheon
Early Monday, Raytheon’s trading stood at $195.67, down 0.51% a share. The company is headquatered in Masschusetts.
GuruFocus ranks it 6 out of 10 in financial strength and 7 out of 10 in profitability and growth. Its P/E ratio is 26.72, or lower than 56% of the industry. It has a P/B ratio of 5.24 or 80 percent lower than its competitors; and a P/S ratio of 2.32, lower than 82% of the industry.
Its ROE is 20.47, or 84% higher than its competitors. Its ROA is 7.18 or 79% higher than the industry.
Guru investors include Barrow, Hanley, Mewhinney & Strauss (Trades Portfolio), which owns 1.4 million shares. Others include Ken Fisher (Trades, Portfolio); Joel Greenblatt (Trades, Portfolio); NWQ Managers (Trades, Portfolio).Ă‚ Ken Fisher (Trades, Portfolio) sold out all shares back in March 2017.
