Lockheed Martin is Wednesday's IBD Stock Of The Day, as the defense contractor looks to capitalize on federal contract money, which have it on pace for solid profit growth in 2023. Lockheed Martin stock edged lower Wednesday.
The Bethesda, Md.-based defense contractor is best known for making the F-22 and F-35 fighter jets. The company also produces an arsenal of helicopters, carriers, ships, drones, missiles, surveillance and defense systems, and armored and commercial vehicles. Lockheed Martin has operations in the U.S. and 6o other countries.
Lockheed Martin strung together a run of three straight quarters in which it topped earnings views before it missed with Q2 results in July. However, the company topped estimates once more in October. Lockheed Martin saw EPS balloon 210% to $6.87. The company slightly missed with revenue, posting $16.58 billion, a 3.5% gain vs. last year.
Defense stocks — including Lockheed Martin stock, Northrop Grumman, General Dynamics and others — had rallied on Russia's Ukraine invasion earlier in 2022 , amid hopes for increased military spending in the long term.
Defense shares have moved sideways or pulled back since then. However, there are still plenty of federal funds going toward defense contracts.
On Dec. 23, President Joe Biden signed the $847 billion National Defense Authorization Act. The bill, which enjoyed strong bipartisan support in Congress, was $45 billion more than the defense budget proposed by the White House, and a 10% increase over the 2021 defense spending levels.
On Tuesday, defense stocks showed strength after the Department of Defense doled out a number of high-value contracts to defense companies late last week. These included a $1.05 billion contract to Lockheed Martin to speed up F-35 fighter jet production.
Lockheed Martin is currently working to deliver more than 100 Lot 18 F-35 Lightning II fighter jets by January 2024. The contract will be used to ensure on-time production and delivery, according to the DOD.
Lockheed Martin also received a $431 million contract earlier this month to deliver High Mobility Artillery Rocket Systems to support the U.S. Army and its allies.
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Lockheed Martin Stock Performance
Lockheed Martin stock fell 0.5% to 483.22 during Wednesday's market trading, holding the 21-day line. Shares are trading tightly, only fractionally higher so far in December, and probably need the end of next week to form a new flat base, according to MarketSmith analysis.
Lockheed Martin stock is technically still in a buy range, 1% above its official 480.09 buy point from a consolidation cleared in late October. However, 491.55, just above its Dec. 20 high, would offer a new entry. Shares have found support at the 21-day and 10-week lines, with the latter catching up over the past several weeks.
Lockheed is due to report fourth-quarter results in late January. Wall Street sees earnings dropping 1% to $7.41 per share. Analysts have sales edging up 3% to $18.26 billion to close out 2022.
Analysts project full-year earnings growing some 20% in 2023 to $27.18 per share, according to FactSet. However, analysts do not forecast that 20% expected gain next year to be consistent. The average EPS increase through 2026 is 2%.
Meanwhile, revenue is expected to edge up around 1% in 2023 to $65.87 billion. Analysts view sales increasing around 11% by 2026 to $72.98 billion.
IBD ranks Lockheed Martin stock fourth in the Aerospace/Defense group. LMT has a Composite Rating of 86 out of 99. Its Relative Strength Rating is 93; the RS Rating is an exclusive IBD Stock Checkup gauge for share price movement, with a 1-99 score. The EPS Rating is 82.
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