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Why Is Lockheed (LMT) Up 3.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Lockheed Martin (LMT). Shares have added about 3.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Lockheed due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Lockheed Martin Q3 Earnings Top Estimates, Sales Down Y/Y

Lockheed Martin reported third-quarter 2021 adjusted earnings of $6.66 per share, which surpassed the Zacks Consensus Estimate of $1.96 by a whopping 239.8%.

The company reported GAAP earnings of $2.21, which declined 64.6 % year over year.

Operational Highlights

In the reported quarter, net sales amounted to $16,028 million, which lagged the Zacks Consensus Estimate of $17,152 million by 6.6%. The top line decreased 2.8% from $16,495 million reported in the year-ago quarter.

Backlog

Lockheed Martin ended the third quarter (on Sep 26, 2021) with $134.8 billion in backlog compared with $147.1 billion at the end of 2020. Of this, the Aeronautics segment accounted for $47.9 billion, while Rotary and Mission Systems contributed $34.1 billion. Meanwhile, Space Systems, and Missiles and Fire Control segments contributed $25.3 billion and $27.6 billion, respectively.

Segmental Performance

Aeronautics: Sales decreased 1.7% year over year to $6.57 billion, primarily due to lower net sales from the F-35 program.

The segment’s operating profit improved 1.3% year over year to $714 million. Operating margin expanded 30 basis points (bps) to 10.9%.

Missiles and Fire Control: Quarterly sales declined 6.4% year over year to $2.78 billion, owing to lower net sales from tactical and strike missile programs, and sensors and global sustainment programs.

The segment’s operating profit improved 2% year over year to $413 million, while operating margin expanded 130 bps to 14.9%.

Space Systems: Sales decreased 5.2% year over year to $2.70 billion in the third quarter. The decrease was primarily due to lower net sales for Atomic Weapons Establishment (“AWE”) program, as it is no longer included in the company's financial results beginning in the third quarter of 2021.

The segment’s operating profit increased 6.5% to $264 million. Operating margin expanded 110 bps to 9.8% in the quarter under review.

Rotary and Mission Systems: Quarterly sales remained almost flat at $3.98 billion on a year-over-year basis. The lower net sales from integrated warfare systems and sensors (IWSS) programs were offset by higher net sales for Sikorsky helicopter programs.

The segment’s operating profit rose 13.6% to $459 million in the third quarter. Operating margin expanded 140 bps to 11.5% in the reported quarter.

Financial Condition

Lockheed Martin’s cash and cash equivalents totaled $2.73 billion as of Sep 26, 2021, compared with $3.16 billion at the end of 2020.

Long-term debt was $11.67 billion, remaining flat with prior-year-end level.

Cash from operations at the end of third-quarter 2021 amounted to $4.95 billion compared with $6.38 billion a year ago.

Guidance

Lockheed Martin has updated its 2021 guidance.

The company currently expects to generate revenues worth approximately$67 billion for 2021, lower than its previously guided revenue range of $67.30 billion to $68.70 billion. The Zacks Consensus Estimate for full-year revenues, which is pegged at $68.34 billion, lies above the company’s updated guidance range.

Earnings per share is anticipated to be $27.17 for 2021, compared with $26.70-$27.00 projected earlier. The Zacks Consensus Estimate for the company’s full-year earnings, which stands at $22.25 per share, lies below the company’s updated guidance range.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted 11.68% due to these changes.

VGM Scores

At this time, Lockheed has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Lockheed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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