Why Lockheed Martin Earnings Sent Investors Fleeing

Lockheed Martin Corp. (NYSE: LMT | LMT Price Prediction) reported second-quarter 2019 results before markets opened Tuesday morning. The world’s largest defense company posted diluted earnings per share (EPS) from continuing operations of $5.00 on revenues of $14.43 billion. In the same period a year ago, the company reported EPS of $4.05 on revenues of $13.4 billion. Second-quarter results also compare to the consensus estimates for EPS of $4.77 and $14.2 billion in revenues.

Cash flow from operations totaled $1.7 billion in the most recent quarter, up from a cash flow deficit of $72 million in the year-ago quarter following pension contributions of $2 billion.

Lockheed raised revenue guidance for the full fiscal year from a prior range of $56.75 billion to $58.25 billion to a new one of $58.25 billion to $59.75 billion. The EPS estimate was also raised, from $20.05 to $20.35 to a new range of $20.85 to $21.15. Operating profit also was boosted from $6.10 billion to $6.25 billion to a new range of $6.33 billion to $6.48 billion.

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CEO Marillyn Hewitt commented:

The corporation achieved another quarter of strong operational and financial results across all four of our businesses, which allowed us to grow our backlog to a new record level and to increase our financial outlook for 2019. Our team remains focused on driving growth, investing in innovative solutions, and creating long-term value for shareholders.

The company repurchased 600,000 shares of its stock valued at $219 million during the second quarter and paid dividends totaling $622 million.

All four of the company segments posted a year-over-year gain in sales and operating profit. Sales rose by more than $200 million in each segment, while profit was up by $6 million in the rotary and mission systems units and $48 million in missiles and fire control units.

Analysts expect Lockheed to post third-quarter sales of $14.43 billion and EPS of $4.84. Full-year EPS is forecast at $20.57 on sales of $58.06 billion.

Investors cheered the raised guidance and the better-than-expected top-line and bottom-line results by snipping about 0.5% from the share price. The company did note that the impact of U.S. actions canceling sales of Lockheed’s F-35 joint strike fighter is not included in the raised guidance. That’s probably the reason for the tepid response to otherwise solid results.

Shares traded down about 0.7% in the late morning Tuesday, at $355.33 in a 52-week range of $241.18 to $373.37. The consensus 12-month price target on the stock was $382.39 before results were announced.

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