Lockheed Martin shares are aiming for a new all-time high

Lockheed Martin New York Stock Exchange: LMT The stock price has been on an upward trend for years, supported by robust defense spending and, more recently, conflict in Ukraine and the Middle East. The takeaway from the Q1 2024 earnings report is that business is good, very good, and that guidance is cautious. The first quarter outperformance may be an isolated case; it may not persist until the end of the year, but in fact suggests otherwise.

Internal metrics show strength in the two segments whose products are more disposable: Rotary & Mission Systems and Missiles & Fire Control. Helicopters are not intended to be disposable, but missiles, drones and logistics systems are. Since there is no foreseeable end to the conflicts that drive the need, investors should expect to see Lockheed Martin beat guidance, if not raise it, over the course of the year. Other reasons to suspect outperformance include the latest US aid package to Ukraine and Israel, worth $95 billion if approved.

Lockheed Martin has a strong neighborhood. All segments outperform

Lockheed Martin reported a solid quarter, strong across all segments. The company produced revenue of $17.19 billion, a gain of 13.8% over last year. The top chart includes the impact of an extra 13th week, but it still beat consensus by 750 basis points. Missiles and fire control was the strongest segment, at 25%, followed by a 16.5% increase in rotary and mission systems, a 10.5% increase in space and a 9.2% increase in aeronautics. The company highlighted the strength of Space, underlining its importance in the advancement of security solutions.

The margin contracted compared to last year, but due to investments in production capacity and research and development of advanced products. Regardless, net income of $1.5 billion and FCF of $1.3 billion are essentially flat compared to last year, allowing the company to keep its balance sheet healthy by repurchasing shares and paying dividends. The news is that adjusted earnings of $6.33 beat Marketbeat’s reported consensus by $0.47 or 800 basis points, which is in line with the view that guidance is cautious.

Lockheed Martin reaffirmed its guidance for 2024. The company expects revenue and earnings in a range in line with analyst consensus, but revenue growth of only about 2.5% compared to the solid double digits produced in the first quarter . The backlog is also in line with the idea that the guidelines are cautious. Backlog grew 10% to $159.4 billion, enough to sustain operations at first-quarter levels for more than two years.

Lockheed Martin’s capital returns are on target

Lockheed Martin has debt and is in debt this quarter, issuing enough for $2 billion in net proceeds, but that’s not a red flag. Debt serves to support growth. Balance sheet highlights include an increased cash position despite dividends, share buybacks and CAPEX spending. Highlights also include a build of current and total resources. The leverage ratio remains low at 2.9 times equity.

The dividend is healthy and reliable. The 2.75% distribution yield represents about 44% of the earnings outlook, and payouts are increasing. The company has grown for twenty-one consecutive years and is on track to reach number 22 this summer. Share buybacks are robust and reduced the diluted count by an average of 5.5% at the end of the first quarter.

The technical outlook for the LMT stock is bullish with the possibility of new highs

LMT stock has an uptrend and is moving higher after the first quarter release. The action is light but in line with the trend and could lead to higher prices in the coming weeks and months. However, there are signs of resistance around $467, so gains may be limited. If the market fails to break out of that level soon, it could continue to move sideways until it reaches the long-term uptrend by the end of the year. If the market can sustain the upward move now, the next target for critical resistance is near $475 and then $500.

Before you consider Lockheed Martin, you’ll want to hear this.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Lockheed Martin wasn’t on the list.

While Lockheed Martin currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here