Lockheed Martin Sentiment Hit By Charges And Headwinds, But Analysts Remain Bullish On F-35 Ramp Up

BofA Securities analyst Ronald J. Epstein reiterated a Buy rating on the shares of Lockheed Martin Corp LMT with a price forecast of $685.

Lockheed Martin reported adjusted earnings per share for fourth-quarter 2024 of $7.71, surpassing BofA’s estimate of $6.60. Revenue for the quarter reached $18.6 billion, slightly missing BofA expectations of $18.8 billion.

Adjusted margins at Missiles and Fire Control (MFC), which came in at 14.8%, solidly topped the BofA estimate of 7.9%.

Lockheed Martin delivered 62 F-35s during the quarter, bringing the total for the year to 110, surpassing BofA’s estimate of 100. However, the company recorded two significant charges totaling $1.7 billion for the quarter, noted the analyst.

These charges had a combined impact of $5.45 on EPS. The company expects FY25 EPS to fall between $27.00 and $27.30, lower than the BofA estimate of $29.20, suggesting potential margin compression compared to 2024.

The analyst’s rating stems from the fact that F-35 deliveries continue to increase and demand for missiles, munitions, and other critical defense systems stays high.

The $685 price forecast is based on 17x 2025E EV/EBITDA versus the S&P500 multiple of 14.7x.

RBC Capital analyst Ken Herbert reiterated an Outperform rating on the shares and lowered the price forecast from $570 to $550.

Lockheed Martin incurred around $1.3 billion in losses from a classified program in the MFC division and approximately $0.4 billion in losses from a classified program in Aeronautics during the quarter.

According to the analyst, these losses were a significant factor in the segment’s weak operating income of just $426 million, representing a 2.3% margin.

Although these unforeseen losses may be affecting market sentiment, the analyst notes this was a prudent move, considering the low stock expectations, which ultimately sets up a cleaner path for 2025 and beyond.

However, the analyst noted that broader softness in defense sentiment added to the pressure on LMT. The price forecast of $550 is based on ~ an 18x 2026 FCF/share estimate of $30.62.

Price Action: LMT shares are trading lower by 0.93% at $453.18 at the last check Wednesday.

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