Lockheed Martin Corp (NYSE: LMT), the aerospace and defense major, recently received a substantial upgrade from RBC Capital, elevating the stock to “Outperform” from “Sector Perform” with a revised price target of $600, up from $500.
F-35 delivery resumption a major boost
This optimistic revision anticipates more than a 9% upside, driven by positive sales growth dynamics and an attractive valuation.
The analysts pointed to Lockheed’s enhanced delivery schedules of the F-35 fighter jets and a robust demand for its advanced missile systems as key drivers of this renewed confidence.
The upgrade from RBC is underpinned by the successful resumption of F-35 deliveries last month, which are critical for boosting Lockheed’s cash flow.
RBC estimates suggest delivery of 95 F-35 jets for 2024, indicating strong production capabilities and inventory management.
This resurgence in F-35 deliveries is vital, not only for revenue but also for maintaining Lockheed’s competitive edge in aerospace defense.
Simultaneously, Lockheed’s Missile and Fire Control (MFC) segment is projected to see continued growth.
This unit, responsible for systems such as HIMARS and Javelin missiles, benefits directly from increased US and allied military spending, which is being driven by heightened global security concerns.
RBC’s analysts, after spending two days with Lockheed’s management, expressed high confidence in the sustained growth of the MFC segment, supported by investments in several defense programs.
Bank of America upgraded Lockheed to ‘Buy’
Other major financial institutions, including Bank of America and TD Cowen, have similarly optimistic views. On July 30, Bank of America upgraded Lockheed to “Buy,” projecting a price target of $635, recognizing the accelerated earnings potential amid growing F-35 deliveries and strong global demand.
TD Cowen’s recent upgrade to “Buy” with a $560 price target following the Department of Defense’s approval of resumed F-35 deliveries also plays into the broader narrative of recovery and growth.
They specifically noted the restart of deliveries under the Technology Refresh 3 (TR-3) program, which enhances the F-35’s technological capabilities, ensuring Lockheed remains at the forefront of military aviation technology.
Lockheed’s Q2 earnings
This slew of upgrades and positive analyst reports comes on the back of Lockheed Martin’s strong Q2 earnings report. The company posted a Non-GAAP EPS of $7.11, outperforming expectations by $0.66, with revenues up 9% Y/Y to $18.1 billion.
These figures not only beat analyst projections but also signify robust operational efficiency and growing market demand for Lockheed’s offerings.
Operational highlights include the substantial backlog of nearly $160 billion, reflecting ongoing and new contract engagements that are more than twice the annual revenue.
Lockheed’s segment results for the quarter further illustrate its impressive growth. The Aeronautics segment saw a 6% increase in net sales, while the Missiles and Fire Control segment reported a 13% rise, driven by heightened production of missile systems.
The Rotary and Mission Systems and Space segments also reported significant sales increases, underscoring the company’s diversified strength across multiple domains of defense technology.
The company’s strategic initiatives, including significant investments in digital technologies and AI, are enhancing its product offerings and operational capabilities.
This is evident from the integration of AI in platforms like the Aegis Combat System and advancements in hypersonic technologies, positioning Lockheed as a leader in next-gen defense technologies.
As Lockheed continues to expand its technological and operational footprint, its financial outlook remains strong. The company has raised its full-year guidance for sales, segment operating profit, and EPS, reflecting confidence in continued growth and profitability.
Considering Lockheed Martin’s strategic advancements, robust financial performance, and favorable analyst upgrades, the company is well-poetised for future growth.
These fundamental strengths provide a solid backdrop as we now turn to examine the technical aspects of Lockheed’s stock performance. Let’s delve into the charts to discern the potential trajectory of Lockheed Martin’s stock in light of its recent positive developments.
Bullish momentum after 2-year rangebound movement
After trading in a $400 to $500 range for more than two years, Lockheed Martin’s stock finally broke above the top end of that range last month after the company announced its Q2 earnings.
LMT chart by TradingView
Since then, the strong has been displaying strong bullish momentum across all timeframes, though it is facing some resistance trading above $550. Hence, investors who continue to remain bullish on the stock like a slew of analysts have two choices on their hands right now.
First, they can wait for the stock to retrace a bit more and buy it near the $520 level. Second, they can buy the stock if it gives a daily closing above $550.
Traders who have a bearish outlook on the stock must refrain from opening a short position unless it starts showing weakness, which will become clear if it falls below its 50-day moving average or the lower band of its 25-day Donchian channel.
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