Should You Buy, Hold or Sell Lockheed Martin Stock Post Q4 Earnings?

Lockheed Martin Corp. LMT delivered mixed fourth-quarter 2024 results. While its bottom line comfortably surpassed the Zacks Consensus Estimate, its top line missed the same. Unimpressively, on a year-over-year basis, both LMT's sales and earnings reflected deterioration. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.While dismal sales performance at two of its four business segments led to the reported quarter’s sales decline, higher cost of sales and interest expense affected the bottom line. As a silver lining, the company ended 2024 with cash and cash equivalents worth $2.48 billion compared with $1.44 billion at the end of 2023. Such an improved cash balance indicates a healthy financial position for LMT    . A prudent investor knows that a significant decision like buying a stock should not depend on a company’s single quarterly performance alone. Instead, to make a more informed decision, one should be mindful of the stock’s performance over the past year in terms of share price return, its long-term prospects as well as risks (if any) to investing in the same. We have provided a detailed discussion on this, as one can see below.LMT Stock Outperforms Industry, But Lags Sector & S&P500Shares of Lockheed have surged 6% over the past year, outperforming the Zacks aerospace-defense industry’s growth of 0.7%. However, the stock has underperformed the broader Zacks Aerospace sector’s growth of 8.7% as well as the S&P 500’s gain of 23% in the same time frame. A stellar performance has been delivered by other industry players like Embraer ERJ, RTX Corp. RTX and Leidos Holdings LDOS, which outpaced the industry, sector as well as the S&P 500. Notably, shares of these defense stocks witnessed a surge of 118.7%, 41.7% and 26.8%, respectively, over the past year.LMT’s One-Year PerformanceImage Source: Zacks Investment ResearchWhat Pushed LMT Stock Up?Lockheed’s broad portfolio of varied products — ranging from stealth fighter aircraft and littoral combat ships to missiles and space exploration capabilities — allows it to secure major defense contracts, boosting its backlog count. Evidently, the company ended 2024 with a record backlog of $176 billion, reflecting a solid increase from the previous year’s level of $160.6 billion. Such improving backlog count reflects the strong demand that LMT’s advanced defense technology and systems enjoy worldwide. This got reflected in the form of solid share price hike over the past year. Moreover, LMT’s solid financial position enables it to make notable payouts to its shareholders. In 2024, Lockheed paid out dividends worth $3.06 billion to its shareholders and repurchased 7.5 million shares worth $3.7 billion. Investors tend to choose stocks like LMT that offer solid shareholder returns in the form of healthy dividend payouts and share repurchases. Will LMT Stock Maintain Its Growth?The global defense industry’s growth outlook remains robust due to heightened geopolitical tensions, leading to increased defense spending worldwide. As the largest U.S. defense contractor, Lockheed thus benefits from consistent contract flows for its combat-proven products from the Pentagon and U.S. allies, as evident from its solid backlog count which implies strong revenue generation prospects. Notably, of its $176 billion worth of backlog, as of Dec. 31, 2024, the company expects to recognize approximately 35% over the next 12 months and 60% over the next 24 months. Such revenue generation prospects also bolster the company’s bottom-line growth opportunities. In line with this, the consensus estimate for LMT’s long-term (three-to-five year) earnings growth rate is pegged at a solid 4.4%.Moreover, it is imperative to mention that apart from its core defense capabilities, Lockheed is a well-known manufacturer of advanced space technology systems ranging from satellites to spacecraft. With the global space economy estimated to exceed the value of $1 trillion beyond 2030, (as per a major number of analysts worldwide), LMT’s growth prospects in this industry remain immense. A quick sneak peek at its near-term earnings and sales estimates mirrors a similar growth story.Estimates for LMTThe Zacks Consensus Estimate for first-quarter 2025 sales and earnings suggests an improvement of 2.6% and 4.1%, respectively, year over year. A similar growth projection is implied in the full-year 2025 estimates as well. However, the bottom-line estimate for the first quarter of 2025 and full-year 2025 suggests a downward movement of 0.8% and 1.2%, respectively, over the past 60 days. This indicates analysts’ declining confidence in the stock. Image Source: Zacks Investment ResearchImage Source: Zacks Investment ResearchHeadwinds to Consider Before Choosing LMT StockDespite being a prominent defense contractor, Lockheed faces some notable challenges and one should consider them before adding this stock to their portfolio. Notably, the aerospace industry, including Lockheed, faces a persistent skilled labor shortage, exacerbated by an aging workforce. According to the Aerospace Industries Association, 29% of industry employees are over 55, leading to retirement-driven workforce gaps projected to reach 3.5 million by 2026. As aircraft manufacturers are increasing production post-pandemic, these labor shortages could impact aerospace stocks like Lockheed, potentially affecting growth and operations amid rising demand for advanced defense aircraft. Moreover, Lockheed’s Canadian Maritime Helicopter Program (“CMHP”), which involves the design, development and production of CH-148 aircraft, has been facing performance issues lately, including delivery delays. The Royal Canadian Air Force’s flight hours have been significantly less than anticipated. This has affected program revenues and the recovery of Lockheed’s costs under this program. As of Dec. 31, 2024, the company’s cumulative losses in relation to CMHP were approximately $100 million.LMT Stock Trading at a PremiumIn terms of valuation, LMT’s forward 12-month price-to-earnings (P/E) is 16.38X, a premium to its peer group’s average of 16.18X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to that of its peers.Image Source: Zacks Investment ResearchShould You Buy LMT Stock Now?Investors interested in Lockheed should wait for a better entry point, considering its premium valuation and downward revision witnessed in its near-term earnings estimate.However, those who already own this Zacks Rank #3 (Hold) stock may stay invested as its financial stability, upbeat share price performance over the past year and solid backlog count offer solid growth prospects.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lockheed Martin Corporation (LMT): Free Stock Analysis Report Embraer-Empresa Brasileira de Aeronautica (ERJ): Free Stock Analysis Report Leidos Holdings, Inc. (LDOS): Free Stock Analysis Report RTX Corporation (RTX): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks