Analysis

Lockheed Martin

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On April 1, 2023
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An investment for the long term?


Fundamental Analysis
Lockheed Martin Corporation is an American aerospace, defense, security and technology company that designs, manufactures and sells military equipment. It has a long history that dates back to 1912 and has become one of the world’s largest defense contractors. In 2021, it had a turnover of USD 67 billion, and in 2022 it was USD 66 billion (-2%).
The company has 4 divisions: aerospace (40% of 2022 sales), missiles and fire control (17.5% of 2022 sales), rotary and flight systems (25% of 2022 sales) and space (17.5% of 2022 sales).
The main customer is the US Department of Defense although the customer base is likely to expand following the Russian attack on Ukraine. Lockheed Martin is headquartered in Bethesda, Maryland and employs more than 116,000 people.
Results The company’s net income in 2022 is $5.7 billion ($21.66 per share). Results are comparable to 2021 ($6.3 billion in profit and $22.76 earnings per share). The company also repurchases its stock each quarter.
The company currently has firm orders worth USD 150 billion.
An important part of the annual report is the refinement of the company’s outlook for 2023 and beyond. No outlook is a guarantee of a company’s profits or performance, but it can certainly give us a sense of what the industry is expecting or what management is concerned about. Lockheed Martin is concerned about:

  • Possible cuts to the U.S. defense budget.
  • Delays in the F-35 program
  • continuing problems in the supply and customer chains after COVID-19
  • the change in decision-making and priorities of nations around the world as a result of the strengthening US dollar, and therefore increasing product prices
  • shortage of quality labour
  • the entry of new companies into the industry
    It is of course up to each individual investor to assess how likely the following risks are.
    Technical analysis
    The stock is in a long-term growth pattern. This is confirmed by looking at the chart and the two moving averages in growth. The current buying opportunity is not recommended by the technical analysis. The moving averages are far apart. The RSI is in the neutral zone. The important resistance at the price of $500 per share is still almost $30 away, which is more than 8%. Despite the higher share price, the daily trading volume is more than 1 million shares, so we cannot expect a sharp increase in the stock due to low volatility.
    Conclusion
    Lockheed Martin does not look like a short-term investment from a fundamental or technical standpoint. The stock is growing slowly but holding its value. Developments in the world that suggest defense spending will increase lend credence to the idea that the stock price could continue to rise. However, it must be taken into account that the currently announced contracts are already factored into the share price. And the company itself is worried about a possible tightening of defense spending by a major customer of the U.S. government. Such news could in turn hamper the stock’s growth.

Sources:
https://finance.yahoo.com/quote/LMT?p=LMT&.tsrc=fin-srch
https://investors.lockheedmartin.com/financial-information/quarterly-result