Valens Equity Weekly Insights - 2023 05 16
Lockheed Martin (LMT) has a long-term profitability tailwind from its multi-decade long F-35 sales cycle, plus growing demand from the U.S. and allies as the world becomes less safe. Uniform Accounting highlights the company's profitability improvements that the market is missing, indicating equity upside.Lockheed is the largest U.S. defense contractor, and it makes high value military equipment
including missiles and aircraft like HIMARS and F-35s. Over the last several years, as F-35
deliveries have ramped up, Uniform ROA has gone through a plateau shift from the high-teens to the high-20s. F-35 deliveries are still ramping up, which has the potential to sustain, if not improve, Uniform ROA.
Lockheed's management team is aligned to focus on margins, turns, and growth, the three components of ROA expansion.
Management confidence in the Q1 earnings call about its long-term demand, including international growth and F-35 outlook, and their confidence about innovation all support further ROA expansion and continued growth.
Coherent (COHR) is being removed from the Conviction Long List. The company has struggled to integrate its transformative acquisition, and the macroeconomic outlook for IoT spending is deteriorating.
LMT
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.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.