Lockheed (LMT) to Report Q3 Earnings: What's in the Cards?

Lockheed Martin Corporation LMT is expected to release third-quarter 2019 results on Oct 22, before the opening bell.

Consistent revenue growth across Lockheed Martin’s major segments is expected to get reflected in the company’s upcoming results. However, operating profit is expected to have taken a hit.

Let's see how things are shaping up prior to this announcement.

Aeronautics Unit: A Key Catalyst

Lockheed Martin’s Aeronautics segment is a major growth catalyst for the defense contractor. It primarily manufactures advanced, combat-proven jets, and comprises 40% of the company’s top line. The strength in Aeronautics business division is expected to get reflected in the to-be-reported quarter’s results with Lockheed Martin delivering increased number of its F-35 Joint Strike Fighter jets. The Zacks Consensus Estimate for F-35s deliveries is 37, indicating 85% improvement from the year-ago-quarter’s numbers.

With the F-35 program being a primary contributor to this segment’s top-line growth, the consensus estimate for this unit’s revenues stands at $5,910 million, suggesting 4.8% improvement from the prior-year quarter reported figure.

Lockheed Martin Corporation Price and EPS Surprise

Lockheed Martin Corporation Price and EPS Surprise

Lockheed Martin Corporation price-eps-surprise | Lockheed Martin Corporation Quote

Space & MFC Units: Other Growth Drivers

Lockheed Martin’s Space business segment has been lately witnessing higher sales volumes for its renowned programs like Next Generation Overhead Persistent Infrared (Next Gen OPIR), Global Positioning System (GPS) III, Advanced Extremely High Frequency (AEHF), and the Orion program. This is expected to get reflected in the unit’s top line.

The Zacks Consensus Estimate for the segment’s third-quarter revenues is pegged at $2,603 million, implying a 2% increase from the year-ago quarter reported figure.

Meanwhile, Missiles and Fire Control (MFC) segment, which provides critical missile defense support to the United States and its foreign allies, delivered outstanding operational performance over multiple programs in the past couple of quarters. In particular, continued growth in this segment’s hypersonic program along with increased volume for classified business and precision fire are likely to have boosted MFC’s top line in the third quarter.

The Zacks Consensus Estimate for MFC segment revenues is pegged at $2,559 million, implying a 12.6% increase from the year-ago quarter reported figure.

Revenue and Earnings Estimates

Solid revenue growth trends reflected by Lockheed Martin’s major business segments are likely to have boosted its overall top line in the soon-to-be-reported quarter. In line with this, the Zacks Consensus Estimate for the company’s third-quarter revenues stands at $14.98 billion, indicating 4.7% increase from the year-earlier quarter reported figure.

However, during the to-be-reported quarter, the company completed some milestone work which may boost its top line in the long term but is likely to have pushed up its cost, thereby affecting segmental profits. For instance, in June, Lockheed Martin’s Space segment and United Launch Alliance technicians completed encapsulating GPS III Space Vehicle 02 in its launch fairings, while in July it completed building the capsule for NASA's Orion spacecraft. In August, cyber experts from Lockheed Martin piloted a first-of-its-kind model that standardizes how to measure the cyber resiliency maturity of a weapon, mission, and/or training system anywhere in its lifecycle.

These, in turn, might have impacted the company’s overall operating profit and dragged down its bottom line.

The Zacks Consensus Estimate for the defense giant’s third-quarter earnings is pegged at $5.03, indicating a decline of 2% from the prior-year quarter's reported number.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Lockheed Martin this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Lockheed Martin has an Earnings ESP of 0.00% and a Zacks Rank #2.

Stocks to Consider

Here are some defense companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

The Boeing Company BA is scheduled to report third-quarter 2019 results on Oct 23. The company has an Earnings ESP of +5.38% and a Zacks Rank #3.

Leidos Holdings, Inc. LDOS is set to report third-quarter 2019 results on Oct 29. The company has an Earnings ESP of +1.52% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman Corp. NOC is scheduled to report third-quarter 2019 results on Oct 24. The company has an Earnings ESP of +2.26% and a Zacks Rank #3.

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