Lockheed Martin Corporation
(
LMT
) announced the acquisition of Chandler/May Inc., an unmanned
aerial systems manufacturer. Terms of the agreement, however,
remained undisclosed. Chandler/May, with facilities in Alabama
and California, will become part of Lockheed's Mission Systems
& Sensors business. Lockheed Martin's prudent acquisition of
Chandler/May would expand its expertise in the design,
development, integration, manufacturing, and support of fully
integrated mission critical systems for unmanned aerial systems
("UAS") and Command, Control, Communications, Computers,
Intelligence, Surveillance, Reconnaissance ("C4ISR") missions.
Based in Bethesda, Maryland, Lockheed Martin is a global security
and aerospace company, engaged in the research, design,
development, manufacture, integration and sustainment of advanced
technology systems, products and services. Key growth drivers of
the company are its focus on debt repayment, its ongoing share
repurchase program and the incremental dividend. Some of Lockheed
Martin's main competitors are
The Boeing Company
(
BA
) and
General Dynamics Corporation
(
GD
).
Lockheed Martin recently reported strong third quarter numbers
with earnings of $2.26 per share beating the Zacks Consensus
Estimate of $1.85. With this the company also beat the year-ago
earnings of $2.06 per share.
Lockheed Martin reported quarterly revenue of $11.9 billion,
beating the Zacks Consensus Estimate of $11.1 billion. However,
the figure fell below the year-ago quarterly revenue of $12.1
billion.
During the third quarter, the company repurchased 3.3 million
shares at a cost of $294 million. In September this year, the
company increased its quarterly dividend rate to $1.15 per share,
up approximately 15 cents from the current payout of
approximately $1.00 per share. The proposed hike would bring the
annual dividend to $4.60, up 15% from the previous payout. The
increased quarterly dividend will be paid on December 28, 2012 to
shareholders of record at the close of business on December 3,
2012.
Going forward, we believe Lockheed Martin has significant upside
potential based on the Obama administration's focus on
Intelligence Surveillance Reconnaissance ("ISR"), unmanned
systems, force protection, cybersecurity, and missile defense. It
already sits on an order backlog of approximately $75.6 billion
at the end of the first nine months of 2012.
Further, we expect shareholder return to continue to be shored up
by the company's focus on debt repayment, its ongoing share
repurchase program and the incremental dividend.
However, we are concerned about the budget deficits and political
uncertainty that make future defense budgets vulnerable to
cutbacks. Lockheed Martin presently retains a short-term Zacks #3
Rank (Hold) that corresponds with our long-term Neutral
recommendation on the stock.
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