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Will Lockheed (LMT) Gain from CEO's Plan for Future Growth?
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In a bid to strengthen the defense contractor’s position in the ever-expanding Aerospace-Defense space, Lockheed Martin Corp.’s (LMT - Free Report) CEO Marillyn Hewson recently highlighted the company’s future growth plans at the annual media day event. Hewson also offered a snapshot of the key achievements in 2016.
Further, Hewson emphasized on the fact that amidst escalating geopolitical tensions globally, Lockheed Martin’s cutting-edge defense technologies and advanced cybersecurity will play a crucial role in strengthening national and economic security.
A Sneak Peak into 2016’s Result
Management identified 2016 as an outstanding year for Lockheed Martin. In fact, according to Hewson, this defense contractor gave “record-setting performance” in the year. In particular, she appreciated the solid expansion of the company in international business. Notably, Lockheed Martin’s international business contributed to 27% of total sales in 2016; while. more than 40% of the company’s new business was derived from international customers.
While F-35 remained a major overseas growth driver, Sikorsky business line also contributed substantially, owing to its military and commercial helicopter offerings.
Other milestones Lockheed Martin achieved in 2016 include: successful divestiture of Information Systems & Global Solutions business; considerable progress with the integration of Sikorsky and subsequent creation of Rotary and Mission Systems business unit; unveiling of the weaponized Black hawk last summer; first installation and deployment of the Terminal High Altitude Area Defense (THAAD) System, outside of U.S. territory; several successful space launches for high-profile programs, such as the GOES-R satellite and a few more.
Future Opportunities
Based on the better-than-expected results that Lockheed Martin was able to generate during 2016, Hewson spoke highly of the company’s futuristic expansion plans. With respect to international business line, management has set a goal to expand sales growth rate to 30% in the next few years. Moreover, 50% of all F-35 orders over the next five years are anticipated to come from international customers, while the Sikorky business line is also expected to continue to contribute handsomely.
Going forward, with respect to its expansion strategy, management has recognized Lockheed Martin’s well-known F-35 program as the largest driver of international growth in the future. Besides, as per this speech by CEO Hewson, it seems like President Trump’s persistent involvement in cutting cost of F-35 did have a major influence on this program’s cost-saving initiative.
Towards this end, Lockheed Martin, along with the U.S. government and Aerospace-Defense industry has launched the “Blueprint for Affordability” and the “Sustainment Cost Reduction Initiative.” These initiatives are aimed at saving more than $5 billion for F-35 customers. Going forward, management plans to reduce $85 million or less per plane by 2019.
Finally, management was also encouraged to notice the recently passed (House only) fiscal 2017 budget, which has strong support for Lockheed Martin’s programs, including the F-35, UH-60 Black Hawks, C-130s, and missile defense programs. No doubt this reflects the U.S. government’s willingness to invest more in defense.
Our View
As hostile threats continue to prevail across the globe, we expect renowned defense contractors like Lockheed Martin to continue to gain traction in days ahead. Further, the recent solid outlook delivered by the company’s CEO boosts this anticipation. Moreover, the company’s expectation to generate more than $5.7 billion in cash from operations during 2017, compared with $5.2 billion at 2016-end, buoys optimism.
However, Lockheed Martin underperformed the Zacks categorized Aerospace/Defense industry in last one year, with the company’s gain of 21.7% being lower than the industry’s increase of 24.3%. This might have been triggered by intense competition the comapny faces from some of the top defense primes in the U.S., namely – The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) and Embraer S.A. (ERJ - Free Report) . Also, the current quarter EPS estimates for the company have declined by 5 cents in the past 60 days, which reflects investors’ reluctance to consider the stock as a suitable investment option for now.
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Will Lockheed (LMT) Gain from CEO's Plan for Future Growth?
In a bid to strengthen the defense contractor’s position in the ever-expanding Aerospace-Defense space, Lockheed Martin Corp.’s (LMT - Free Report) CEO Marillyn Hewson recently highlighted the company’s future growth plans at the annual media day event. Hewson also offered a snapshot of the key achievements in 2016.
Further, Hewson emphasized on the fact that amidst escalating geopolitical tensions globally, Lockheed Martin’s cutting-edge defense technologies and advanced cybersecurity will play a crucial role in strengthening national and economic security.
A Sneak Peak into 2016’s Result
Management identified 2016 as an outstanding year for Lockheed Martin. In fact, according to Hewson, this defense contractor gave “record-setting performance” in the year. In particular, she appreciated the solid expansion of the company in international business. Notably, Lockheed Martin’s international business contributed to 27% of total sales in 2016; while. more than 40% of the company’s new business was derived from international customers.
While F-35 remained a major overseas growth driver, Sikorsky business line also contributed substantially, owing to its military and commercial helicopter offerings.
Other milestones Lockheed Martin achieved in 2016 include: successful divestiture of Information Systems & Global Solutions business; considerable progress with the integration of Sikorsky and subsequent creation of Rotary and Mission Systems business unit; unveiling of the weaponized Black hawk last summer; first installation and deployment of the Terminal High Altitude Area Defense (THAAD) System, outside of U.S. territory; several successful space launches for high-profile programs, such as the GOES-R satellite and a few more.
Future Opportunities
Based on the better-than-expected results that Lockheed Martin was able to generate during 2016, Hewson spoke highly of the company’s futuristic expansion plans. With respect to international business line, management has set a goal to expand sales growth rate to 30% in the next few years. Moreover, 50% of all F-35 orders over the next five years are anticipated to come from international customers, while the Sikorky business line is also expected to continue to contribute handsomely.
Going forward, with respect to its expansion strategy, management has recognized Lockheed Martin’s well-known F-35 program as the largest driver of international growth in the future. Besides, as per this speech by CEO Hewson, it seems like President Trump’s persistent involvement in cutting cost of F-35 did have a major influence on this program’s cost-saving initiative.
Towards this end, Lockheed Martin, along with the U.S. government and Aerospace-Defense industry has launched the “Blueprint for Affordability” and the “Sustainment Cost Reduction Initiative.” These initiatives are aimed at saving more than $5 billion for F-35 customers. Going forward, management plans to reduce $85 million or less per plane by 2019.
Finally, management was also encouraged to notice the recently passed (House only) fiscal 2017 budget, which has strong support for Lockheed Martin’s programs, including the F-35, UH-60 Black Hawks, C-130s, and missile defense programs. No doubt this reflects the U.S. government’s willingness to invest more in defense.
Our View
As hostile threats continue to prevail across the globe, we expect renowned defense contractors like Lockheed Martin to continue to gain traction in days ahead. Further, the recent solid outlook delivered by the company’s CEO boosts this anticipation. Moreover, the company’s expectation to generate more than $5.7 billion in cash from operations during 2017, compared with $5.2 billion at 2016-end, buoys optimism.
However, Lockheed Martin underperformed the Zacks categorized Aerospace/Defense industry in last one year, with the company’s gain of 21.7% being lower than the industry’s increase of 24.3%. This might have been triggered by intense competition the comapny faces from some of the top defense primes in the U.S., namely – The Boeing Company (BA - Free Report) , Northrop Grumman Corp. (NOC - Free Report) and Embraer S.A. (ERJ - Free Report) . Also, the current quarter EPS estimates for the company have declined by 5 cents in the past 60 days, which reflects investors’ reluctance to consider the stock as a suitable investment option for now.
Zacks Rank
Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>