On Jan 10, 2014, Zacks Investment Research upgraded the
largest U.S. defense operator
Lockheed Martin Corp.
) to a Zacks Rank #1 (Strong Buy).
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Why the Upgrade?
Lockheed Martin has been witnessing rising earnings estimates for
2014 on the back of continuous order flows from the Pentagon's
funding list. In the recent past, the company has received a
series of contracts from the U.S. Department of Defense (DoD),
ranging from big to small tickets. These defense deals are a
testimony to the wide range of products at the disposal of
Recently, Lockheed Martin received two production contracts from
the U.S. Air Force, valued at $449 million in total. The
contracts call for the company to continue production of its
Joint Air-to-Surface Standoff Missile, and the extended range
variant. The two contracts include production of 340 baseline
missiles and 100 ER missiles.
Apart from the big wins, the company received small contracts,
which kept the order book ticking amidst harsh budget
austerities. Again, the company seems confident of selling F-35
fighter jets to foreign clients, which would to some extent
compensate for lower defense spending at home. Most of the
company's top line is expected to come from foreign governments
over the next five years.
This well-known defense behemoth delivered positive earnings
surprises in 3 of the last 4 quarters with an average beat of
14.00%. Along with earnings growth, Lockheed Martin has boosted
its dividend rate. From a quarterly payout of 11 cents a share in
2002, it has increased to $1.33. Its annual dividend is now
$5.32, which has a 3.6% yield.
The solid performance of the company in 2013 is also reflected in
its traded price. Lockheed's share price closed at $148.66 on Dec
31, 2013, reflecting a gain of 64.8% over the last twelve-month
We believe these strong fundamentals have led to the rank
Other Stocks to Consider
Besides Lockheed Martin, other companies in the in the
aerospace/defense sector that are worth considering include
General Dynamics Corp.
Northrop Grumman Corporation
The Boeing Company
). These stocks carry a Zacks Rank #2 (Buy).