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Lockheed (LMT) Misses on Q3 Earnings, Raises '17 Outlook

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Lockheed Martin Corp. (LMT - Free Report) reported third-quarter 2017 earnings from continuing operations of $3.24 per share, which missed the Zacks Consensus Estimate of $3.25 by 0.3%. Earnings also declined from the year-ago period’s bottom-line figure by 10.2%.

Operational Highlights

In the reported quarter, total revenues came in at $12.17 billion, which missed the Zacks Consensus Estimate of $12.83 billion by 5.1%.

However, the company’s revenues increased 5.3% from $11.55 billion a year ago. Notably, all segments registered year-over-year growth in sales, except Space Systems.

Lockheed Martin Corporation Price, Consensus and EPS Surprise

 

Lockheed Martin Corporation Price, Consensus and EPS Surprise | Lockheed Martin Corporation Quote

 

Backlog

Pentagon’s prime defense contractor, Lockheed Martin ended the third quarter (on Sep 24, 2017) with $103.6 billion in backlog, up 12.5% from $92.1 billion at the end of the second quarter. Of this, the Aeronautics segment accounted for $39.5 billion while Rotary and Mission Systems contributed $29.8 billion. Also, $17.5 billion came from Space Systems, and $16.8 billion from Missiles and Fire Control.

Segmental Performance

Aeronautics: Sales increased 14% year over year to $4.8 billion, driven by higher net sales from the F-35 program, on account of higher volume on production and sustainment.

Operating profit also advanced 18% year over year to $517 million, while operating margin dropped 40 basis points (bps) to 10.8%.

Missiles and Fire Control: Quarterly sales rose 3% year over year to $1.8 billion due to higher net sales from tactical missile programs.

Operating profit dropped 7% year over year to $270 million and operating margin contracted 150 bps to 15.1%.

Rotary and Mission Systems: Quarterly sales of $3.4 billion inched up 0.2% on account of higher volume.

Operating profit dropped 1.2% year over year to $244 million, while operating margin contracted a mere 10 bps to 7.3%.

Space Systems: Sales dropped 1% year over year to about $2.3 billion in the third quarter, primarily owing to lower volumes from government satellite programs.

Operating profit declined 52% to $218 million while operating margin contracted 1000 bps to 9.7% in the quarter.

Financial Condition

Cash and cash equivalents were $2.94 billion as of Sep 24, 2017 compared with $1.84 billion as of Dec 31, 2016. Long-term debt was $14.27 billion, compared with $14.28 billion as of Dec 31, 2016.

Cash from operations at the end of the third quarter was $5 billion compared with $4.5 billion at the end of 2016.

During the quarter, the company repurchased 1.6 million shares for $500 million compared with the buyback of 1.2 million shares for $278 million a year ago. The company paid dividends worth $522 million to shareholders compared with the year-ago period figure of $484 million.

Guidance

Lockheed Martin raised its 2017 financial guidance. The company expects to generate revenues in the range of $50.0-$51.2 billion, higher than the earlier provided projection of $49.8-$51.0 billion.

On the bottom-line front, the company now expects its earnings per share to be in the range of $12.85-$13.15 during 2017, higher than the earlier-announced guidance range of $12.30-$12.60.

The company also raised its 2017 expectations for cash from operations. Lockheed Martin currently expects to earn more than $6.2 billion in cash from operations, than the prior guidance of more than $6 billion.

Zacks Rank & Key Pick

Lockheed Martin currently carries a Zacks Rank #4 (Sell).

A better-ranked stock in the same space is The Boeing Company (BA - Free Report) , which currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boeing has surpassed the Zacks Consensus Estimate in the trailing four quarters, with a positive earnings surprise of 13.67%. The company has a long-term earnings growth rate of 13%. 

Upcoming Peer Releases

Huntington Ingalls Industries, Inc. (HII - Free Report) is expected to report third-quarter 2017 results on Nov 8. The company has an Earnings ESPof +2.04% and a Zacks Rank #2.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Leidos Holdings, Inc. (LDOS - Free Report) is expected to report third-quarter 2017 results on Nov 2. The company has an Earnings ESP of +3.75% and a Zacks Rank #3 (Hold).

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