The Street's Reaction To Lockheed Martin's Q3 Earnings

Global security and aerospace company Lockheed Martin Corporation LMT reported Tuesday its third-quarter results, highlighted by a top-and-bottom-line beat and an upward revised guidance.

Here's a summary of how some of the Street's top analysts reacted to the print.

The Analysts

• Goldman Sachs' Noah Poponak upgraded Lockheed Martin from Neutral to Buy (added to Conviction List) with a price target lifted from $391 to $394.
• Wells Fargo's Sam Pearlstein maintains at Neutral, unchanged $355 price target.
• Citi's Jonathan Raviv maintains at Buy, unchanged $400 price target.
• Morgan Stanley's Rajeev Lalwani maintains at Overweight, unchanged $386 price target.
• Baird's Peter Arment maintains at Overweight, unchanged $410 price target.
• Jefferies' Sheila Kahyaoglu maintains at Hold, unchanged $340 price target.

Goldman Sachs: Budget Growth A Catalyst

President Donald Trump and the Republican administration are likely to grow the U.S. Defense budget above and beyond current expectations, Poponak said in a note. In return, Lockheed Martin could grow at a faster pace versus its peers given its exposure to aerospace, missile demand and missile defense, new helicopter programs and the space market.

Exiting 2018, Lockheed Martin should show a TTM (trailing 12 months) book-to-bill of 1.25 times, which suggests several years of upper-single digit organic revenue growth to follow.

Wells Fargo: Disappointing Outlook

Lockheed Martin easily beat expectations, but management's 2019 revised guidance fell short of the already high expectations, Pearlstein wrote in a note. Specifically, the company expects 5 to 6 percent revenue growth although it could see margin pressure while higher capital expenditure could hurt earnings and cash flow in the coming year.

Citi: Upside To Guidance

Lockheed Martin's guidance is likely conservative as management "left room" to lift its numbers throughout 2019, Raviv said in a note. Management could revise its numbers higher as early as January when it's expected to release a more formal cash target for the coming years.

Guidance of higher expenses would be consistent with sustainable growth, which should ease concerns of peak growth.

Morgan Stanley: 'Supportive' Of Narrative

Lockheed Martin's report emphasizes the bullish case for owning the stock, Lalwani said in a note. Management's incrementally positive tone supports an above-average margin profile, solid growth and a healthy free cash flow yield of around 6 percent in 2019.

Beyond the near-term, the F-35 offers better visibility to support a longer-term bullish stance.

Baird: Industry 'Bellwether'

Lockheed Martin boasts a revenue base of more than $50 billion, which makes it the "industry bellwether" given a diverse product portfolio line that covers every key area, Arment said in a note. This should help the company achieve an average free cash flow conversion to net income of 115 percent over the coming years and warrant a "healthy" dividend payout and share buyback program.

Jefferies: Premium Valuation Versus S&P

Lockheed Martin's stock is trading at a consensus two-year forward PE multiple of 16.8 times, which represents an 11 percent discount to its three-year average, Kahyaoglu wrote in a note. However, the stock is also trading at an 8 percent premium to the S&P 500 index's three-year average.

At time of publication, Lockheed Martin's stock was trading around $314.33 per share.

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