After falling to a low of $ 321 in the first quarter Lockheed Martin (NYSE: LMT) It reached a high of $ 394 in the second quarter, recording 22% growth. The January decline was primarily associated with concerns about a pandemic disruption of production. The company’s fundamentals are backed by huge backlogs and stable margins, so consistent cash generation could help pay dividends and buy back shares. Moreover, the recent 10% decline in stock prices looks like a buying opportunity given the current price-earnings ratio (P / E) being significantly lower.Trefis emphasizes the main factors driving it Lockheed Martin Rating Interactive dashboard analytics that include revenue, margins, multiple ratings, and competitive comparisons with your peers.
[Updated 01/21/2021] -Lockheed Martin shares appear to be undervalued
Recently, concerns over the full production of the F-35 have hit Lockheed Martin (NYSE: LMT) shares, despite multiple contracts by the US military and a recent bid for the acquisition of Aerojet.
Aviation and missile and fire control segments were major performers
In 2020, Lockheed Martin has the potential to report total revenue of $ 63 billion, primarily supported by the aviation and missile divisions. The aviation sector is engaged in the design and development of the F-35 Lightning, C-130 Hercules, F-16 Falcon, and F-22 Raptor. The Missile & Fire Control Department is responsible for the popular PAC-3 missiles. Aerojet Rocketdyne’s advanced rocket propulsion technology further enhances the company’s missile and space operations. Interestingly, US government agencies, including NASA, the US Air Force, the US Army, and MDA, account for 96% of Aerojet’s total revenue. This is an important similarity between the two companies. Since 2017, Lockheed Martin’s Aviation, Missile & Fire Control, Rotary & Mission Systems, and Space segments have seen revenue growth of 25%, 51%, 10%, and 22%, respectively.
Dividends supported by stable margins
Over the past few years, the company’s net margin has been fairly stable, in the range of 9-10%, supporting dividends and share buybacks. Quarterly dividends increased from 1.80 / share in the first quarter of 2017 to 2.60 / share in the third quarter of 2020. Despite production-related challenges in 2020, the company may report a net return of 10% and earnings per share growth of 11%. In addition, LMT returned $ 1.1 billion to investors through share buybacks during the first nine months of 2020. This shows the creation of strong free cash flow even during the crisis. Considering the total revenue of $ 63 million, EPS of $ 24.21 and P / E of 17.2 times, LMT’s share price is estimated at $ 417. This is 20% above the current market price.
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