Morningstar | Lockheed Martin Raises 2019 Guidance on 23% 1Q Revenue Growth; Our Fair Value Estimate Under Review
Wide-moat Lockheed Martin raised guidance for 2019, which includes an EPS range of $20.05-$20.35 coupled with at least $7.5 billion of operating cash flow for the full year. The company is lapping the tax cut tailwind that has helped push defense contractor earnings higher due to their significant amount of U.S. domestic production and sales. We’re leaving shares under review as we transition coverage to a new analyst.Revenue was up nearly 23% this quarter, reaching $14.3 billion on growth in aeronautics (up 27% year over year thanks to F-35) and missiles & fire control (up 40%). Operating margins at the segment level expanded about 70 basis points with three out of Lockheed’s four segments achieving margin expansion. Operating margins in aeronautics moved down marginally 30 basis points to 10.5% this year. EPS from continuing operations was up year over year at $5.99 compared with $4.02 last year, noting a relatively low 16% effective tax rate in the first quarter of 2018. Operating cash flow before pension contributions slid by about $440 million, to $1.6 billion.
The Department of Defense cut procurement plans on Lockheed’s F-35 in its budget submission, requesting 78 aircraft in fiscal 2020, which is six fewer than previously planned. Congress may rectify this and maybe even add funding for C-130 aircraft, which also had its procurement funding slashed by the DoD.
Lockheed Martin is a security and aerospace company. The company has four segments: Aeronautics, which is engaged in the research, design, development, manufacture, integration, sustainment, support and upgrade of military aircraft; Missiles and Fire Control, which provides air and missile defense systems, logistics, fire control systems, and mission operations support; Rotary and Mission Systems, which provides design, manufacture, service and support for military and commercial helicopters, radar systems, and simulation and training services; Space, which researches, designs, develops, engineers and produces satellites, space transportation systems, and strategic, strike, and defensive systems.
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