Back to top

Image: Bigstock

Will Supply Chain Issue Hit Lockheed (LMT) in Q4 Earnings?

Read MoreHide Full Article

Lockheed Martin Corporation (LMT - Free Report) is slated to release fourth-quarter 2021 results on Jan 25, before the opening bell.

Solid sales volume from the majority of segments is expected to have generated solid top-line growth for the company in the soon-to-be-reported quarter. However, supply chain disruption might have had some impact on its overall performance.

Let's see how things have shaped up prior to this announcement.

Aeronautics Remains a Key Catalyst

The Aeronautics segment, which primarily manufactures advanced, combat-proven jets and comprises almost 40% of the company’s top line, is expected to have once again acted as a major growth catalyst in the soon-to-be-reported quarter.

Notably, Lockheed Martin boasts a history of delivering a significant number of military jets every quarter. We expect a similar trend to have prevailed in the fourth quarter, which, along with solid production volume for jets like F-35, is expected to have boosted top-line growth for the Aeronautics business division.

The Zacks Consensus Estimate for this unit’s revenues for the fourth quarter stands at $7,149 million, indicating a 6.5% improvement from the prior-year reported figure.

MFC Unit: Another Growth Driver

We expect Lockheed Martin’s Missiles and Fire Control (MFC) segment, which provides critical missile defense support to the United States and foreign allies, to have also recorded a strong operational performance in the soon-to-be-reported quarter.

In particular, increased production volume for tactical and strike missile programs is expected to have boosted the  MFC unit’s top-line performance in the fourth quarter.

The Zacks Consensus Estimate for MFC segment revenues is currently pegged at $3,159 million, implying a 10.2% increase from the year-ago reported figure.

Q4 Expectations

Supply chain disruption impacted Lockheed’s sales activity in the third quarter of 2021, resulting in poor top-line performance. Such a supply chain disruption is likely to have had a minor impact on the company’s performance in the fourth quarter.

Nevertheless, with the economy coming back to normal, strong production volume, expected from most of its segments, is likely to have boosted Lockheed’s overall top line in the to-be-reported quarter. The Zacks Consensus Estimate for the company’s fourth-quarter revenues stands at $17.67 billion, indicating a 3.7% increase from the year-earlier reported figure.

Solid sales volume from most of the segments along with strong operational performance is projected to have boosted Lockheed’s fourth-quarter bottom line, which might have been partially marred by supply chain issues.

The Zacks Consensus Estimate for the defense giant’s fourth-quarter earnings is pegged at $7.22 per share, suggesting an improvement of 13.2% from the prior-year reported number.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Lockheed this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

Lockheed has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are a couple of defense companies you may want to consider, as these have the right combination of elements to post an earnings beat this season:

The Boeing Company (BA - Free Report) has an Earnings ESP of +61.40% and a Zacks Rank #3. BA has a four-quarter average negative earnings surprise of 219.73%.

The Zacks Consensus Estimate for Boeing’s fourth quarter is pegged at a loss of 14 cents per share, reflecting a decline from earnings of 2 cents 30 days ago. BA boasts a long-term earnings growth rate of 4%.

Triumph Group (TGI - Free Report) has an Earnings ESP of +1.01% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

TGI delivered a four-quarter average earnings surprise of 101.89%. The Zacks Consensus Estimate for Triumph Group’s fourth-quarter earnings, pegged at 20 cents, has deteriorated 9.1% over the past 30 days. TGI boasts a long-term earnings growth rate of 2.6%.

Textron (TXT - Free Report) has an Earnings ESP of +7.66% and a Zacks Rank #3. TXT delivered a four-quarter average earnings surprise of 27.89%.

The Zacks Consensus Estimate for Textron’s fourth-quarter earnings, pegged at 97 cents, has remained flat over the past 30 days. TXT boasts a long-term earnings growth rate of 28.3%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.