Lockheed Martin
The company exceeded analysts' estimates on the top and bottom lines and maintained its guidance for the full year. Defense & aerospace stocks tend to outperform during periods of rising rates and slowing growth as their revenues are less affected by these factors. Further, defense spending has risen globally following Russia's invasion of Ukraine and mounting fears that China is poised for military action against Taiwan.
Inside the Numbers
In Q3, Lockheed Martin reported $6.71 per share in earnings which topped analysts' estimates of $6.58 per share which was a 4% improvement from last year. Revenue also exceeded expectations at $16.6 billion vs $16.1 billion, a 3% gain from last year's Q3.
The beat was driven by a strong performance from its aeronautics unit which produces the F-35 fighter jet which has seen increased demand specifically from Europe, following Russia's aggression. And, shares added to gains following the CFO's guidance for 2024 where he sees low single digits growth for 2024 with the potential for more.
Currently, it's forecasting $65.3 billion in revenue for the full year despite some continued supply chain issues. It also sees $6.1 billion in free cash flow next year which is similar to 2022. In addition to this, the company approved a $14 billion share buyback plan over the next 3 years which equates to 12% of its total market cap. The company also pays a 2.6% dividend yield.
It's also seen increased interest and demand for its High Mobility Artillery Rocket System (HIMARS) launchers and ammunition which many credit for Ukraine's strong defense against Russia. And in recent months, Ukraine has been successful in pushing back Russian forces.
The combination of rising rates and slowing economic growth has been brutal for nearly all financial assets. One exception is stocks like Lockheed Martin whose revenues are more impacted by global defense spending which tends to increase regardless of economic conditions and should meaningfully accelerate given the heightening of geopolitical tensions.
Thus, it's not surprising that the stock has a double-digit gain and looks to be on the verge of a major breakout from a technical perspective.
