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The Street's Reaction To Lockheed Martin's Q3 Earnings

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The Street's Reaction To Lockheed Martin's Q3 Earnings
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Global security and aerospace company Lockheed Martin Corporation (NYSE: LMT) reported Tuesday its third-quarter results, highlighted by a top-and-bottom-line beat and an upward revised guidance.

Here's a summary of how some of the Street's top analysts reacted to the print.

The Analysts

  • Goldman Sachs' Noah Poponak upgraded Lockheed Martin from Neutral to Buy (added to Conviction List) with a price target lifted from $391 to $394.
  • Wells Fargo's Sam Pearlstein maintains at Neutral, unchanged $355 price target.
  • Citi's Jonathan Raviv maintains at Buy, unchanged $400 price target.
  • Morgan Stanley's Rajeev Lalwani maintains at Overweight, unchanged $386 price target.
  • Baird's Peter Arment maintains at Overweight, unchanged $410 price target.
  • Jefferies' Sheila Kahyaoglu maintains at Hold, unchanged $340 price target.

Goldman Sachs: Budget Growth A Catalyst

President Donald Trump and the Republican administration are likely to grow the U.S. Defense budget above and beyond current expectations, Poponak said in a note. In return, Lockheed Martin could grow at a faster pace versus its peers given its exposure to aerospace, missile demand and missile defense, new helicopter programs and the space market.

Exiting 2018, Lockheed Martin should show a TTM (trailing 12 months) book-to-bill of 1.25 times, which suggests several years of upper-single digit organic revenue growth to follow.

Wells Fargo: Disappointing Outlook

Lockheed Martin easily beat expectations, but management's 2019 revised guidance fell short of the already high expectations, Pearlstein wrote in a note. Specifically, the company expects 5 to 6 percent revenue growth although it could see margin pressure while higher capital expenditure could hurt earnings and cash flow in the coming year.

Citi: Upside To Guidance

Lockheed Martin's guidance is likely conservative as management "left room" to lift its numbers throughout 2019, Raviv said in a note. Management could revise its numbers higher as early as January when it's expected to release a more formal cash target for the coming years.

Guidance of higher expenses would be consistent with sustainable growth, which should ease concerns of peak growth.

Morgan Stanley: 'Supportive' Of Narrative

Lockheed Martin's report emphasizes the bullish case for owning the stock, Lalwani said in a note. Management's incrementally positive tone supports an above-average margin profile, solid growth and a healthy free cash flow yield of around 6 percent in 2019.

Beyond the near-term, the F-35 offers better visibility to support a longer-term bullish stance.

Baird: Industry 'Bellwether'

Lockheed Martin boasts a revenue base of more than $50 billion, which makes it the "industry bellwether" given a diverse product portfolio line that covers every key area, Arment said in a note. This should help the company achieve an average free cash flow conversion to net income of 115 percent over the coming years and warrant a "healthy" dividend payout and share buyback program.

Jefferies: Premium Valuation Versus S&P

Lockheed Martin's stock is trading at a consensus two-year forward PE multiple of 16.8 times, which represents an 11 percent discount to its three-year average, Kahyaoglu wrote in a note. However, the stock is also trading at an 8 percent premium to the S&P 500 index's three-year average.

At time of publication, Lockheed Martin's stock was trading around $314.33 per share.

Related Links:

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4 Reasons Behind Cowen's Lockheed Martin Upgrade

Latest Ratings for LMT

DateFirmActionFromTo
Jan 2019CitigroupMaintainsBuyBuy
Jan 2019SusquehannaInitiates Coverage OnPositive
Jan 2019Vertical ResearchUpgradesHoldBuy

View More Analyst Ratings for LMT
View the Latest Analyst Ratings

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