Shares of Lockheed Martin (LMT 0.75%) hovered around breakeven for most of the trading day on Wednesday before suddenly falling more than 3% around 1:30 p.m. ET.
The timing coincided with management's appearance at an investor conference where cost pressures were discussed, which appears to have caught investors off guard.
Image source: Lockheed Martin.
A fragile time for Lockheed holders
Lockheed Martin ranks as the world's largest pure-play defense contractor, with a diversified portfolio of planes, missiles, helicopters, and space systems. What the company lacks is a near-term growth catalyst following its loss to Boeing in the competition to produce the U.S. Air Force's next fighter jet.
For now, Lockheed is more of an income stock whose investors can hope for future growth through what are now still classified programs.
On Wednesday, Lockheed Martin chief financial officer Evan Scott spoke at a Bank of America industrial conference. During his talk, which coincided with the stock plunge, Scott made reference to incremental cost pressures on a classified aerospace program.
In 2024, Lockheed Martin took more than $500 million in charges related to a classified aerospace program. The market appears to be interpreting the comments as a warning that further charges are coming this quarter.
There was also a suggestion that cash inflows related to the F-35 could slip into the third quarter, which could make it difficult for Lockheed Martin to hit Wall Street second-quarter expectations.
NYSE: LMT
Key Data Points
Is Lockheed Martin stock a buy?
In one sense, charges are to be expected when one is dealing with bleeding-edge programs. And the F-35 second-quarter miss could work out fine for Lockheed in the long run if it means that the next two groups of purchases are made at the same time, which would provide clarity to the backlog.
But Lockheed Martin hasn't given investors much to get excited about of late, and the news was understandably poorly received.
For investors seeking a mix of modest long-term growth and income, Lockheed offers a 3% dividend yield and the potential for growth over time. But any hopes of a quick acceleration from here took a hit from Scott's comments.
