Morningstar | Lockheed Martin Reaping Strong Demand, Adjusts Guidance Upward; Putting our FVE Under Review
Wide-moat Lockheed Martin reported strong second-quarter results and a promising backlog, and once again raised annual earnings guidance for 2019 (from $20.05-$20.35 to $20.85-$21.15 per share). Lockheed grew second-quarter EPS 23% to $5 per share, and improved its backlog in three out of four business areas. The firm grew its top line 8% year over year to $14.4 billion, with segment operating profit growing 6% to $1.6 billion. Missiles and fire control and space segments performed strongest: missiles and fire control grew sales 16% to $2.4 billion while space increased sales 11% to $2.7 billion; with both segments aided by growth in hypersonic programs. Lockheed Martin’s segment operating profit reflected lower tax rates and higher FAS/CAS benefit related to pension  adjustments, but overall consolidated operating profit grew 17% to $327 million. Segment margins were roughly flat to the prior-year period with changes mostly due to various charges in myriad programs; year-to-date segment operating margin is a strong 11.4% versus 11.1% mid-2018.Based on current expectations of greater sales volume across all segments, Lockheed Martin increased its 2019 sales outlook by $1.5 billion (a couple percentage points) and increased its segment operating profit outlook by $225 million (about 3.5%). 2019 is indeed shaping out well for the firm. We are putting our fair value estimate under review at this time as we transition coverage to a new analyst. We anticipate resuming coverage in about a month.
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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