The aerospace and defense company continues to deliver, but is undervalued by at least a low double-digit percentage
I have long been a fan of Lockheed Martin Corp. (NYSE:LMT),
the world's largest defense contractor, as the company is in a prime position
to capitalize on increases in defense spending.
The company posted better-than-expected results earlier this
week and raised its guidance once again. The stock experienced a bit of a
selloff following the release of the earnings report, but shares continue to
look inexpensive based on the company's historical valuation as well as its
intrinsic value as calculated by GuruFocus.
Let's examine Lockheed Martin's most recent results more in
detail.
Lockheed Martin reported third-quarter earnings results on
Oct. 20. The company's earnings per share of $6.25 were 16 cents ahead of Wall
Streets' estimates and an increase of 10.4% from the previous year. Revenue
grew 8.7% to $16.5 billion, $358 million more than expected.
Every segment within the company showed positive growth.
Aeronautics grew 8% to $6.7 billion. This segment continues
to benefit from higher volumes for the F-35 program. Classified development
contracts were up $130 million. Operating margins fell 20 basis points to 10.6%.
Missiles and Fire Control was the real standout as sales
were up 14% to just under $3 billion. Tactical and strike missile programs
experienced an increase in demand. Integrated air and missile defense, led by
the Patriot Advanced Capability-3 and Terminal High Altitude Area Defense
programs, also saw higher volumes. Lower volumes for the Apache program led to
a slight decline in sensors and global sustainment programs. Operating margins
improved 20 basis points to 13.6%.
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