We are downgrading our recommendation on Lockheed Martin Corp. to
Neutral from Outperform. In the third quarter, revenues missed the
Zacks Consensus Estimate and declined year over year. Lockheed
Martin expects 2015 revenues to decline in the low single digits,
and also expects lower cash from operations for the year compared
with its previous forecast. Yet, the company's better-than-expected
third-quarter earnings were commendable considering the severe
pressure on the U.S. military budget. The raised full-year guidance
is all the more encouraging. Lockheed Martin also got a boost from
its recent decision to freeze its defined benefit pension plan,
which will aid earnings over the long term. The healthy dividend
yield and stable cash flow will likely keep the stock defensive in
spite of budget uncertainties.
Lockheed Martin Corporation is the largest defense contractor in
the world. The company's customer base includes the U.S.
government, foreign governments, and other commercial buyers.
The company operates through the following five businesses:
Aeronautics, Information Systems & Global Solutions, Missiles
and Fire Control (MFC), Mission Systems and Training (MST), and
Aeronautics is engaged in the design, research and development,
systems integration, production and support of advanced military
aircraft and related technologies. The segment operates in three
lines of business: Combat Aircraft, Air Mobility and Other
This segment is busy with major programs comprising F-35
Lightning II Joint Strike Fighter C-130 Hercules F-16 Fighting
Falcon F-22 Raptor and C-5M Super Galaxy.
Information Systems & Global Services provides management,
engineering and logistical services, and offers solutions for the
command, control, communications, computers, intelligence,
reconnaissance, and surveillance (C4ISR) activities of the U.S.
Department of Defense (DoD), intelligence agencies, other federal
agencies and allied countries. IS&GS has three principal lines
of business: Civil, Defense and Intelligence.
In the MFC business, headquartered in Dallas, some of its
high-profile programs include the Terminal High Altitude Area
Defense System, Joint Light Tactical Vehicle, PAC-3 Missiles, as
well as logistics and other technical services from GTL.
In the MST business, headquartered in Washington, DC, some of
its high-profile programs include the Aegis Combat System, Littoral
Combat Ship, MH-60 helicopter avionics, as well as military and
Space Systems is engaged in the design, development,
engineering, and production of commercial and military space
systems. Space Systems has three lines of business: Satellites,
Strategic & Defensive Missile Systems, and Space Transportation
Lockheed Martin Corp. (LMT): Read the Full Research
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
LOCKHEED MARTIN (LMT): Free Stock Analysis
To read this article on Zacks.com click here.