Why Shares of Lockheed Martin Rocketed 11.1% Higher in April

A strong first quarter established Lockheed Martin as the prime operator among defense contractors.

Lou Whiteman
Lou Whiteman
May 3, 2019 at 10:21PM
Industrials

What happened

Shares of Lockheed Martin (NYSE:LMT) climbed 11.1% in April, according to data provided by S&P Global Market Intelligence, after the company produced a blockbuster first quarter that confirmed the overall strength of its businesses.

So what

On April 23, Lockheed Martin reported first-quarter earnings of $5.99 per share on revenue of $14.3 billion, easily blowing past analyst expectations for $4.34 per share in earnings on revenue of $12.52 billion.

There was no weak link in the quarter. Every business unit inside Lockheed surpassed revenue expectations, led by missiles, up 40% year over year, and aeronautics, up $659 million from the year prior thanks to growing F-35 volumes.

The F-35 Joint Strike Fighter in flight.

Lockheed Martin's F-35 fighter is soaring. Image source: Lockheed Martin.

The quarter was likely helped by a sharp year-over-year increase in Department of Defense outlays during the first three months of 2019, but Lockheed Martin is showing itself to be a best-in-class operator. The company's portfolio includes the F-35 Joint Strike Fighter, the Aegis missile system, Sikorsky helicopters, and a bevy of rockets, missiles, and ancillary products. It's a leader in hypersonics, weapons, and interceptors able to travel at least five times the speed of sound, an area of increasing Pentagon interest.

Now what

Lockheed Martin finished the quarter with a record backlog of more than $130 billion in orders. The company said it expects to earn $20.05 to $20.35 per share in all of 2019 on revenue of between $56.75 billion and $58.25 billion, higher than its prior forecast and ahead of the current consensus for $19.58 per share in earnings on sales of $56.81 billion.

Those numbers could still end up looking conservative. In the weeks since the quarter ended, Lockheed Martin has either formalized or acknowledged more than $10 billion worth of additional orders. In March, the company received an initial $945.9 million down payment for a Terminal High Altitude Area Defense (THAAD) missile defense system headed to Saudi Arabia, which was followed by an additional $2.5 billion on April 1, just after the quarter ended. Lockheed has also added major space and aviation orders in April.

Lockheed Martin went into the year as one of the best buys in the defense sector. The case to own the company's shares has only grown more compelling through the first four months of 2019.