Investors in
Lockheed Martin
needed some good news about the F-35 jet fighter to get the stock flying. Its second-quarter earnings were pretty good news.
They came in better than expected.
Lockheed (ticker: LMT) reported adjusted earnings per share of $6.75 from $16.7 billion in sales, Tuesday morning. Wall Street was looking for earnings per share of $6.45 from $15.9 billion in sales. Lockheed earned $6.43 a share from $15.1 billion in sales in the first quarter of 2023.
Orders also exceeded revenue, which left the backlog at a record $158 billion.
Looking ahead, sales for 2023 are now expected to come in at about $66.5 billion, up from prior guidance of $65.5 billion provided in April. Earnings per share are expected to be about $27.10, up from $26.75 a share.
Lockheed stock was up about 1% in premarket trading Tuesday at $474.68.
S&P 500
and
Dow Jones Industrial Average
futures were both down slightly.
Investors appear fine with the numbers. They will still have questions about the F-35 when management talks to investors at 11 a.m. Eastern time.
“The Pentagon [in July] stopped accepting F-35 aircraft fitted with Technology Refresh 3 (TR-3) upgrades until testing of the TR-3 capability is completed,” wrote
Morgan Stanley
analyst Kristine Liwag in a report previewing earnings. “We estimate that a shortage of about 55 aircraft deliveries versus Lockheed’s earlier 147 to 153 target could drive a [roughly] $440 million headwind to 2023 free cash flow.”
Slowing deliveries doesn’t really impact earnings. Lockheed recognizes sales and profits as planes are built.
As for cash, Lockheed expects to generate about $6.2 billion in 2023 free cash flow and the company left cash flow guidance unchanged in the second quarter report. Wall Street’s financial models currently point to about $6.3 billion. CFO Jay Malave tells Barron’s that any cash flow impact from F-35 delivery delays would only amount to timing changes between 2023 and 2024. Cash will still come in the door.
The company delivered five F-35 jets in the first quarter of 2023, down from 26 delivered in the first quarter of 2022. Deliveries for the second quarter rebounded, coming in at 45 units.
F-35 concerns are still one overhang for shares. The stock has been stuck in 2023. Coming into Tuesday trading, Lockheed shares are down about 3% so far this year, while both the S&P and Dow have risen. Lockheed stock rose 2% Monday, closing at $473.60.
Liwag, for her part, rates shares at Hold and has a price target of $532 apiece. Overall, about 31% of analysts covering Lockheed stock rate the shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $505 a share.
Write to Al Root at [email protected]
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