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Lockheed Martin Corp LMT

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Morningstar’s Analysis

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We Think Lockheed's Shares Offer Upside Despite Slowing Spending Environment; Maintaining $433 FVE

Burkett Huey, CFA Equity Analyst

Analyst Note

| Burkett Huey, CFA |

In our view, Lockheed Martin is the highest quality defense prime contractor due to its prime position on highly prioritized programs, particularly the F-35, and the company’s portfolio positioning toward areas of secular spending growth, especially missile-related and space technologies. We think the market’s legitimate concern that substantial fiscal stimulus in 2020 ought to stymie medium-term defense spending growth creates an opportunity for investors as we anticipate that Lockheed can continue growing organic revenue at a low mid-single-digit pace despite a slowing spending environment. Our view is predicated on our opinions that the defense budget will flatten, rather than shrink, and that U.S. perception of danger from great powers will shift more of the budget toward contractors. We think that Lockheed’s position as the highest-quality contractor should give investors more confidence in its ability to continue growing despite a slowing budgetary environment.

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Company Profile

Business Description

Lockheed Martin is the largest defense contractor globally and has dominated the Western market for high-end fighter aircraft since being awarded the F-35 program in 2001. Lockheed’s largest segment is Aeronautics, which is dominated by the massive F-35 program. Lockheed’s remaining segments are rotary & mission systems, which is mainly the Sikorsky helicopter business; missiles and fire control, which creates missiles and missile defense systems; and space systems, which produces satellites and receives equity income from the United Launch Alliance joint venture.

6801 Rockledge Drive
Bethesda, MD, 20817-1877
T +1 301 897-6000
Sector Industrials
Industry Aerospace & Defense
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2019
Stock Type High Yield
Employees 110,000