Lockheed Posts Continued Operational Declines, but Our End-Market Outlook for the Firm Has Improved

Wide-moat-rated Lockheed Martin posted a revenue decline and improved segment operating margins during the second quarter as the firm awaits additional funding on the F-35 Lots 15-17. Sales of $15.4 billion and earnings per share of $1.16 missed FactSet consensus estimates by 3.3% and 38.3%, respectively. We note that quarterly earnings were highly impacted by a non-cash pension risk transfer. After adjusting our near-term sales outlook slightly downward, we are increasing our fair value estimate for Lockheed Martin to $447 from $445 due to the time value of money.