Lockheed Martin recently released its Q1 results, surpassing revenue and earnings expectations. The company reported revenue of $17.2 billion and earnings of $6.33 per share, exceeding the consensus estimate of $16.1 billion and $5.80, respectively. The strong performance was fueled by a healthy demand environment amid ongoing geopolitical tensions. Despite the positive Q1 results, Lockheed Martin’s stock is seen to have limited growth potential due to various factors.
Looking at the stock performance over the past few years, LMT stock has seen gains of 30% from early January 2021 to around $460 currently, compared to a 35% increase in the S&P 500 over the same period. However, the performance of LMT stock has been inconsistent, with returns of 0% in 2021, 37% in 2022, and -7% in 2023, underperforming the S&P 500 in two of the three years. With the current volatile macroeconomic environment, it remains to be seen if Lockheed Martin will underperform the S&P 500 in the coming year or experience a significant surge.
Lockheed Martin’s revenue in Q1 rose by 14% year-over-year to $17.2 billion, with strong growth in segments such as Missiles and Fire Control, Rotary & Mission Systems, Space, and Aeronautics. Despite the revenue growth, the consolidated operating margin declined by 170 basis points to 11.8% in Q1, leading to a decline in earnings per share. Looking ahead, the company anticipates revenue for 2024 to range between $68.5 and $70.0 billion, with earnings projected to be between $25.65 and $26.35.
The recent passing of a $95 billion package by the U.S. Senate to aid countries like Ukraine, Israel, and Taiwan, as well as a significant contract win worth $17 billion to develop next-generation interceptors, are positive developments for Lockheed Martin. While some of these positives are likely already factored into the stock price, continued geopolitical tensions are expected to keep defense stocks, including Lockheed Martin, in the spotlight in the near future. Additionally, with the stock trading at a slightly higher valuation multiple than its historical average, the outlook for Lockheed Martin remains positive amidst ongoing uncertainties.
In conclusion, Lockheed Martin’s strong Q1 performance and positive developments in the defense sector point towards a favorable outlook for the company. While its stock may have limited room for growth from a valuation standpoint, the continued focus on defense spending and ongoing geopolitical tensions are expected to support Lockheed Martin’s performance in the coming months. With the defense sector remaining in focus, Lockheed Martin is poised to benefit from these trends in the near term.
