Credit Suisse are double upgrading an aerospace and defense stock on the basis of a bullish growth outlook. Here's what investors need to know.
The Lockheed Martin Analyst: Scott Deuschle upgraded Lockheed Martin Corp LMT from Underperform to Outperform and raised the price target from $427 to $510.
The Lockheed Martin Takeaways: “The rationale for our upgrade focuses on our updated sector outlook, improved confidence in LMT’s growth inflection and estimated upside opportunity,” Deuschle said in a Monday upgrade note.
Check out more analyst notes here.
For defense stocks, revenue almost always rises off an acceleration in bookings, the analyst said: "So we are increasingly optimistic that LMT can return to growth this year.”
While Lockheed is anticipating flat revenue in 2023, Credit Suisse believes the company's bookings growth points to a more significant growth acceleration, particularly as supply chain and outlays improve.
Lockheed has a multiple rerating opportunity as its out-year Earnings Before Interest and Taxes (EBIT) growth aligns with Northrop Grumman Corp NOC, Deuschle said. Credit Suisse projects that Lockheed can deliver 5.9% EBIT growth in 2025, which is in line with Northrop Grumman.
The investment bank raised its 2024 and 2025 earnings per share estimates to $27.63 and $29.74, respectively, based on higher revenue in Mission and Training Solutions and Space Systems.
Deuschle said the main risks to the bullish outlook include lower Department of Defense budgets and sector rotation.
LMT Price Action: Lockheed Martin shares were trading down 1.1% at $463.96 Tuesday morning.
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