Try as I might, I just can't find anything mean to say about Lockheed Martin (NYSE: LMT).

Why would you want to?
It's nothing personal. Really, it's as simple as this: Writing glowing praise about a company, without any criticism to leaven it, makes for a pretty boring column. But the fact of the matter is there's precious little to criticize about Lockheed Martin these days.

The world's largest defense contractor reported its fiscal 2007 results last week, and they were, well, superb. In every respect. First, the numbers: Lockheed sold 6% more stuff this year than last, and somehow translated that into 22% growth in earnings per share.

Actually, I can be more specific than that. First off, Lockheed expanded its operating margins across the board:

  • Operating margins at Aeronautics added 200 basis points, rising to 12%.
  • Electronics Systems tacked on 60 b.p., ending at 12.6%.
  • Information Systems & Global Services grew 40 b.p. to 9.3%.
  • Space Systems increased an even 100 b.p. to 10.4%.

Put it all together, and Lockheed has upped its firmwide operating margin to 10.8%. That's better than Boeing (NYSE: BA) and Northrop Grumman (NYSE: NOC), Raytheon (NYSE: RTN) and L-3 (NYSE: LLL), and not all that far behind General Dynamics (NYSE: GD).

Those improvements in profitability translated Lockheed's single-digit sales growth into strong double-digit growth in net profits -- 20%. Then Lockheed jacked that number up a bit on a per-share basis by reducing its diluted share count by 2.1%, resulting in 22% growth in EPS. Nice.

Extra credit
Also pleasing is the sheer level of disclosure that Lockheed practices. I mean, for the world's largest defense company, you'd expect a sizeable earnings report at year-end -- but this is ridiculous. Lockheed gives you so much information in its reports, it's quite frankly embarrassing to firms that try to get away with a few lines of text and a missing cash flow statement. For investors, it's an embarrassment of another sort: an embarrassment of riches. Cash flow. Capex. It's all in there. Segment results, broken out and complete with pre-calculated operating margins. Backlog levels (they're up 1%, by the way, so we're still looking at a potential slowdown in sales).

Really, about the only thing I can find that merits even the smallest complaint is the price of the stock. Fifteen times trailing earnings, and 13 times trailing free cash flow, is a little on the expensive side if Lockheed grows at the expected 11% rate over the next half decade. There. As criticisms go, that's going to have to suffice for today. Congrats, Lockheed. You're a mite on the pricey side, and that's the worst I can say about you.

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