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Lockheed's (LMT) Order Growth Likely to Boost Q1 Earnings

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Lockheed Martin Corporation (LMT - Free Report) is expected to release first-quarter 2019 results on Apr 23, before the opening bell.

In the last reported quarter, the company delivered in-line earnings. Also, it outperformed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 12.45%.

Let's see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Lockheed Martin is likely to beat estimates in the first quarter because it has the right combination of the two key ingredients. A stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Lockheed Martin has an Earnings ESP of +4.16% as the Most Accurate Estimate is pegged at $4.47, higher than the Zacks Consensus Estimate of $4.29.

Zacks Rank: Lockheed Martin currently carries a Zacks Rank #3.

We caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors at Play

Being a prominent defense contractor, Lockheed Martin continues to win significant contracts from the U.S. Defense Department and its allies. This, in turn, consistently boosts the company’s earnings and revenues. We expect the upcoming first-quarter 2019 results to reflect similar trends.

On the revenue front, it is imperative to mention that a strong backlog for a defense company reflects solid growth prospects. Last year, Lockheed Martin’s backlog grew 25% annually, mirroring huge order growth that the company experienced during the same time frame. We can expect this ample order growth to duly get realized into substantial revenue recognition in the soon-to-be-reported quarter as well.  

In line with this, the Zacks Consensus Estimate for the company’s first-quarter revenues stands at $12.7 billion, indicating an 8.7% increase year over year.

Moreover, higher segment operating profit and lower effective tax rate should drive the soon-to-be-reported quarter’s earnings. The Zacks Consensus Estimate for the defense giant’s first-quarter earnings is pegged at $4.29, mirroring a solid 6.7% improvement year over year.

Key Picks

In addition to Lockheed Martin, investors can consider the following players from the same sector that have the right combination of elements to post an earnings beat this quarter.

Raytheon Company (RTN - Free Report) is scheduled to report first-quarter 2019 results on Apr 25. The company has an Earnings ESP of +1.05% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntington Ingalls Industries, Inc. (HII - Free Report) is set to report first-quarter 2019 results on May 2. The company has an Earnings ESP of +4.63% and a Zacks Rank #3.

General Dynamics Corp. (GD - Free Report) is scheduled to report first-quarter 2019 results on Apr 24. The company has an Earnings ESP of +1.35% and a Zacks Rank #3.

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