On Jul 8, 2013, shares of
Lockheed Martin Corp.
) soared to a new 52-week high of $109.39 driven by sizeable
contract wins from the Department of Defense as well as from its
international customers. The company recorded positive earnings
surprise in three of the last four quarters, resulting in an
average beat of 16.6%.
Lockheed has successfully clinched a number of defense
contracts in the first half of 2013, thanks to its diversified
operations. The company's persistent focus on technological
innovation has allowed Lockheed to attract lucrative government
orders in the past as well as present.
The most notable award received by Lockheed this year is the
$320 million U.S. Air Force contract for the supply of enhanced
communications reliability, survivability, and information
capabilities. Its strategic joint venture with
), United Launch Alliance, proved profitable with the entity
clinching a lofty $1.1 billion order for the production of the
new Evolved Expendable Space Launch Vehicle.
Overseas contract flows have also been promising. Lockheed
secured a $308.3 million foreign military sales contract for the
continued delivery of tactical missiles and modification kits to
Kuwait defense forces.
Furthermore, Lockheed's cost-control efforts bore positive
results with the development and production cost for F-35
fighters declining 1.1% during the first quarter. We believe
these positive factors will help Lockheed to successfully counter
the uncertain environment in the defense sector.
The expected long-term earnings growth rate for the company is
set at 6.8% while the Zacks Consensus Estimate for 2013 reflects
an estimated 6.4% jump to $8.99 from $8.45 in 2012.
The present valuation makes the shares of Lockheed look
attractive. The forward price/earnings ("P/E") multiple of 12.1x
is lower than the peer group average of 14.5x, reflecting a
discount of 16.5%. In addition, Return on Equity ("ROE") of the
company is 232.7%, significantly higher than the peer group
average of 18.2%.
Lockheed currently holds a Zacks Rank #3 (Hold). Other
companies in the industry worth considering are Zacks Ranked #1
Erickson Air-Crane Incorporated
) and Zacks Ranked #2 (Buy)
Northrop Grumman Corp.
Bethesda, MD-based Lockheed Martin presently has a market
capitalization of $34.72 billion.
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