Why did Lockheed Martin shares collapse so famously?
Yesterday, the shares of one of the world’s largest arms companies fell by more than 11%. The entire defense sector was under pressure. What happened? Lockheed Martin’s (LMT) reporting results disappointed investors.
In a rather unexpected way, Lockheed Martin’s revenue in the third quarter fell by 2.9% to $16.03 billion, compared with $16.5 billion for the same period in 2020. Net income decreased by 63% to $614 million, or $2.21 per share, from $1.7 billion, or $6.25 per share, a year earlier.
Against this background, Lockheed Martin has worsened its annual forecast. The company now expects revenue in 2021 to be $67 billion instead of the previously forecast $67.3-68.7 billion.
The annual net profit per share will be $22.45 against the previously forecast $21.95-22.25. In addition, revenue for 2022 to decrease from the expected levels of 2021 to $66 billion.
Revenues of the aeronautics division decreased by 2% to $6.57 billion due to a decrease in sales of F-35 fighters. The income of the missile and fire control division fell by 6% YoY and amounted to $2.78 billion due to lower sales of GMLR and Hellfire multiple launch rocket systems and SNIPER outboard sighting stations.
The revenues of the rotary and mission systems segment decreased slightly from $3.998 a year earlier to $3.98 billion, which was due to a decrease in sales of IWSS and TPQ-53 tactical reconnaissance systems. At the same time, offset by high sales of Sikorsky helicopters.
The revenue of the space division decreased by 5%. It amounted to $2.7 billion due to a decrease in sales due to the renationalization of the Atomic Weapons Establishment (AWE) program, which is no longer included in the company’s financial results starting from the third quarter of 2021.
As we can see, there is nothing tragic that could cause significant disappointment.
There is no upward movement, And that’s the main thing. The market does not forgive this today. Nevertheless, Lockheed is an exciting company with good potential.
At current prices, especially taking into account the drawdown of the cost, buying paper in a portfolio of long-term investments is, in my opinion, quite a reasonable idea. But, of course, it will not bring you a doubling in a year. No. But it may well grow by 8-15% (possibly more) per year.
