Sikorsky Adds $6 Billion To Lockheed Martin's 2016 Revenue Forecast, Drexel Hamilton Says

• Shares of Lockheed Martin Corporation LMT have appreciated 18.61 percent over the past six months, rising to a high of $225.91 on November 27.
• Drexel Hamilton’s Pete Skibitski has maintained a Buy rating and price target of $229 on the company.
• The acquisition of Sikorsky Aircraft, closed on November 6, adds $8 billion in debt financing and $1 billion in cash, significantly impacting Lockheed Martin’s balance sheet.

According to the Drexel Hamilton report, “Within the MS&T segment, Sikorsky adds ~$1.08B to our 4Q/2015 revenue forecast and $6.0B to 2016, assumed down high-single-digits %-wise yr/yr due to commercial helicopter headwinds.”

Analyst Pete Skibitski estimates a run-rate of $225 million in deal amortization per year and $100 million in integration costs in 2016, which would lead to savings of $150 million by 2018.

“We also assume an incremental $254m in interest expense in 2016, modest working capital headwind and higher deferred taxes,” Skibitski mentioned, while adding that the transaction costs were estimated at $44 million/$0.10 in 4Q15.

The deal is expected to become GAAP accretive in 2017. The 2015 GAAP EPS estimates and the 2016 EPS estimate have been lowered from $11.38 to $11.35 and from $12.51 to $12.47, respectively.