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General Motors (GM) and Lockheed Martin (LMT): Growth and Income Stocks

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In this week’s video, I discuss General Motors (GM - Free Report) , and Lockheed Martin (LMT - Free Report) .  Both of these companies recently reported earnings, and gave long term data to support their future growth. 

General Motors (GM - Free Report) reported earnings where they easily beat both the Zacks consensus earnings and revenue estimates.  2017 was a great year for the company as they set several quarterly and annual records.  For FY 17, the company posted records in EPS diluted-adjusted of $6.62, EBIT-adjusted margins +8.8%, North America EBIT-adjusted margins +10.7%, and GM Financial EBT-adjusted of $1.2 billion.  As for the quarterly records, EBIT-adjusted of $3.1 billion up +18.7%, ESP diluted-adjusted of $1.65 a +21.3% increase, North America EBIT-adjusted of $2.9 billion, and GM Financial EBT-adjusted of $0.3 billion with revenues up $3.3 billion. 

The big driver behind the record breaking year was international sales.  For the year, the company sold 8.9 vehicles globally, which was a +0.8% improvement from the previous year.  Further, GM saw all three key markets increase their market share.  But, the biggest area of sales growth was in China, as the company sold 4 million vehicles which was a record. Moreover, the Cadillac brand saw a sales increase of +51%.  In South America, the Chevy brand saw sales increase by +13.8%.  Lastly, global deliveries of electric vehicles hit a record of 69,500 with the Chevrolet Bolt EV seeing deliveries of 26,000, another record high. 

Looking into 2018, the company is introducing new full-sized trucks; the GMC Sierra, and Chevrolet Silverado.  The addition of these two new vehicles gives GM the “widest-ranging” truck portfolio in the industry.  The automaker is also introducing four new crossover vehicles; Chevrolet Travers, Buick Enclave, GMC Terrain, and the new Cadillac XT4 crossover.  This innovation and introduction of new models in the pickup and crossover segments is very important, as consumer preferences have shifted from the typical passenger car, to these areas.  Further, GM can produce these pickups and crossovers at a reduced cost, and sell them for higher prices. 

Beyond 2018, the company is still on track to introduce at least 20 (potentially 23) new all-electric vehicles by 2023.  This is key in both the Chinese and India markets as the countries are trying to curb vehicle emissions. 

In the earnings report, management announced that it expects the 2018 performance to be in line with its record breaking 2017 results.  Further, management stated that 2019 results will be propelled by its new line of pickup trucks.  So, after filing for bankruptcy in 2009, the company has bounced back, and looks to be well positioned for years to come.  Oh by the way, the company also pays a solid 3.59% annual dividend as well. 

Lockheed Martin (LMT - Free Report) also posted earnings results where they crushed both the Zacks consensus earnings and revenue estimates.  The company had an excellent quarter where they saw year over year gains in several important categories; Net sales +9.4%, Adjusted earnings +25.1%, and Cash from operations +105.8%.  Further, LMT’s four main segments, Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space, all saw improvements in net sales, and operating profit. 

One of the big areas for the company is the building and maintenance of the new F-35 fighter jets for the U.S. military.  In 2016, LMT delivered 53 new jets, and another 66 in 2017.  This pace is expected to ramp up all the way through 2022 with an estimated 168 new jets delivered for a total of 745 by the end of the current contract.  This will provide a steady stream of income for the company for the next four years. Further, in just the last 8 days, Lockheed Martin was awarded just under $800 million in new contracts that extend through 2021.

Another positive for LMT is the new budget proposal, which has been reported to have a tentative agreement in Congress that calls for a significant increase in defense spending.  LMT would be a direct beneficiary of this increased spending. 

Due to the positive outlook, management increased FY 2018 EPS guidance on the upside, and guided in line for FY 18 revenues.  Lastly, the company also pays a nice 2.32% annual dividend, so while the company continues to grow, the investor will get the added bonus of an above average dividend too.




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