Lockheed Martin Corporation LMT is scheduled to release first-quarter 2025 results on April 22, before the opening bell.
The Zacks Consensus Estimate for LMT’s revenues is pegged at $17.76 billion, implying a 3.3% improvement from the year-ago quarter's reported figure. The consensus mark for first-quarter earnings is pegged at $6.32 per share, suggesting a 0.1% slip from $6.33 reported in the prior-year quarter. The bottom-line estimate has gone down 2% in the past 60 days. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Zacks Investment Research
Image Source: Zacks Investment Research
LMT, America’s largest defense contractor, has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 10.33%.
Zacks Investment Research
Image Source: Zacks Investment Research
Earnings Whisper for LMT
Our proven model does not conclusively predict an earnings beat for Lockheed this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Lockheed has a Zacks Rank #3 and an Earnings ESP of -0.18%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping LMT’s Upcoming Q1 Results
An upbeat sales performance from LMT’s three out of four business segments is likely to have had a favorable impact on the company’s first-quarter top-line performance.
Aeronautics to Post Solid Sales
The Aeronautics segment, which primarily manufactures advanced, combat-proven jets and contributes almost 40% to the company’s top line, is likely to deliver impressive first-quarter results.
Higher sales volume from increased production and sustainment contracts for the F-35 jet program is likely to have bolstered this segment’s top line. The Zacks Consensus Estimate for the Aeronautics unit’s first-quarter revenues is pegged at $6,983.6 million, indicating a 2% rise from the prior-year period’s reported figure.
Mixed Projections From Other Segments
The remaining three segments are projected to have delivered mixed performance in the to-be-reported quarter.
Lower sales from the commercial civil space due to continued lower volume from the Orion program and some classified programs might have adversely impacted the Space segment’s top line.
The Zacks Consensus Estimate for the segment’s revenues is pinned at $3,223.3 million, indicating a 1.4% decline from the prior-year quarter’s reported number.
LMT’s Missiles and Fire Control (“MFC”) segment provides critical missile defense support to the United States and foreign allies. A higher sales volume, resulting from the production ramp-up of multiple programs including the Joint Air to Surface Standoff Missile (“JASSM”), Long Range Anti-Ship Missile (“LRASM”), Guided Multiple Launch rocket system (“GMLRS”) and PAC-3, is likely to have benefited this unit’s quarterly sales performance.
The Zacks Consensus Estimate for MFC’s first-quarter revenues is currently pegged at $3,209.4 million, indicating 7.2% growth from the top line recorded a year ago.
The production ramp-up of the CH-53K helicopter program within the Sikorsky unit, along with higher sales volume from the Canadian Surface Combatant and laser programs within the integrated Warfare systems and sensors business, is likely to have bolstered the Rotary and Mission Systems (“RMS”) segment’s sales in the quarter under review.
The Zacks Consensus Estimate for the RMS units' first-quarter revenues is currently pegged at $4,302.8 million, indicating 5.3% growth from the top line recorded a year ago.
Outlook for LMT’s Q1 Bottom Line
Impressive sales performance from three of LMT's major business segments must have boosted its overall earnings performance in the first quarter.
However, non-operational headwinds like an unfavorable FAS/CAS pension adjustment and higher interest expenses are projected to have hurt LMT’s bottom-line growth to some extent in the soon-to-be-reported quarter.
Price Performance & Valuation
Lockheed’s shares have exhibited a downward trend, losing a notable percentage over the year-to-date period. Specifically, the stock has lost 4.5%, underperforming the Zacks aerospace-defense industry’s rise of 2.6%.
LMT- YTD Performance
Zacks Investment Research
Image Source: Zacks Investment Research
On the contrary, other notable stocks from the same industry have rallied year to date and comfortably outpaced the industry’s performance. Shares of Northrop Grumman NOC and General Dynamics GD have risen 15.2% and 4.8%, respectively, year to date.
From a valuation perspective, LMT is trading at a discount when compared to its industry. Currently, it is trading at 16.66X forward 12-month price/earnings, which is lower than its industry’s forward price/earnings multiple of 23.49. However, its five-year median is 16.05X. So, the company’s valuation looks stretched when compared with its five-year range.
LMT’s Price-to-Earnings (forward 12 Months)
Zacks Investment Research
Image Source: Zacks Investment Research
Its industry peers are also currently trading at a discount. While the forward 12-month price/earnings multiple for Northrop is 19.1, the same for General Dynamics is 17.70.
Investment Thesis
Widespread hostilities engulfing the global defense map in recent times have prompted nations worldwide to ramp up their defense arsenal significantly. This has been acting as a solid growth catalyst for defense contractors like Lockheed, Northrop and General Dynamics, in the form of solid contract wins. We may thus expect LMT’s first-quarter 2025 results to reflect this in terms of notable backlog growth.
Backed by its solid top-line prospects, the company has been offering notable rewards to its shareholders. Impressively, LMT’s dividend yield of 2.84% outpaces that of the S&P 500 (1.40%).
However, LMT’s elevated leverage remains a cause of concern for its investors, as evident from its long-term debt-to-capital ratio, which came in quite higher than that of its peer group.
LMT’s Long-Term Debt-to-Capital
Zacks Investment Research
Image Source: Zacks Investment Research
Should You Buy LMT Stock Before Q1 Earnings Release?
Lockheed might disappoint with its first-quarter results, considering the company’s dismal year-to-date share price performance and negative Earnings ESP. Considering this and the stock’s elevated leverage, investors interested in this stock should wait until tomorrow. However, those who already own LMT stock may continue to do so, considering its discounted valuation and impressive dividend yield.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
