Lockheed Martin (LMT) Beats on Q2 Earnings, Ups 2020 View

Lockheed Martin Corp. LMT reported second-quarter 2020 adjusted earnings of $6.13 per share, which surpassed the Zacks Consensus Estimate of $5.71 by 7.4%.

Including an impairment charge of 34 cents, the company reported earnings of $5.79 per share. The bottom line also improved 15.8% from the year-ago quarter’s $5. This year-over-year upside can be attributed to higher sales.

Operational Highlights

In the reported quarter, net sales amounted to $16,220 million, which outshined the Zacks Consensus Estimate of $15,235 million by 6.4%. The reported figure also increased 12.4% from $14,427 million a year ago, driven by sales growth in all its segments.

Lockheed Martin Corporation Price, Consensus and EPS Surprise

Lockheed Martin Corporation Price, Consensus and EPS Surprise

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

Backlog

Lockheed Martin ended the second quarter (on Jun 28, 2020) with $150.3 billion in backlog, up 4.4% from $144 billion at the end of 2019. Of this, the Aeronautics segment accounted for $56.2 billion, while Rotary and Mission Systems contributed $37.2 billion. Space Systems contributed $25.9 billion and $31 billion came from the Missiles and Fire Control segment.

Segmental Performance

Aeronautics: Sales increased 17% year over year to $6.53 billion, primarily driven by higher net sales from the F-35 programs. Also, higher volume of classified development contracts contributed to sales growth at this unit.

The segment’s operating profit improved 25% year over year to $739 million. Operating margin expanded 70 basis points (bps) to 11.4%.

Missiles and Fire Control: Quarterly sales improved 16% year over year to $2.80 billion owing to higher sales from tactical and strike missile programs as well as integrated air and missile defense programs.

The segment’s operating profit increased 13% year over year to $370 million, whereas operating margin contracted 40 bps to 13.2%.

Rotary and Mission Systems: Quarterly sales of $4.04 billion improved 7% from the prior-year quarter on account of higher sales for Sikorsky helicopter programs driven by Seahawk production programs and VH-92A production contracts.

The segment’s operating profit improved 24% year over year to $429 million, while operating margin contracted 140 bps to 10.6%.

Space Systems: Sales rose 7% year over year to about $2.87 billion in the first quarter. The uptick was driven by government satellite programs as well as strategic and missile defense programs.

The segment’s operating profit declined 13% to $252 million. Operating margin contracted 190 bps to 8.8% in the reported quarter.

Financial Condition

Lockheed Martin’s cash and cash equivalents totaled $2.86 billion as of Jun 28, 2020, compared with $1.51 million at the end of 2019. Long-term debt was $12.17 billion, higher than the prior-year-end level of $11.40 billion.

Cash from operations at the end of second-quarter 2020 amounted to $4.50 billion compared with $3.33 billion a year ago.

During the reported quarter, the company repurchased 0.7 million shares for $259 million compared with the buyback of 0.6 million shares for $219 million in the year-ago quarter.

Lockheed Martin paid out dividends worth $671 million to its shareholders in the second quarter compared with the year-ago quarter’s figure of $622 million.

Guidance

For 2020, Lockheed Martin has raised its financial guidance. The company currently expects to generate revenues of $63.50-$65 billion, higher than the range of $62.25-$64 billion projected earlier. The Zacks Consensus Estimate for full-year revenues, pegged at $63.51 billion, lies below the midpoint of the updated guidance.

Earnings per share are currently anticipated to be in the band of $23.75-$24.05 for 2020, compared with the earlier range of $23.65-$23.95. The Zacks Consensus Estimate for the company’s full-year earnings, pegged at $24.05, is in line with the higher end of the  guidance range.

Zacks Rank

Lockheed Martin currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Q2 Defense Releases

Boeing BA will release its results on Jul 29.

General Dynamics GD will release its results on Jul 29.

Northrop Grumman NOC will release its results on Jul 30.

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