Lockheed Martin Faces Steepest Monthly Drop In 3 Years As Government Shutdown Looms

Lockheed Martin Corp. LMT shares are enduring their most challenging month since January 2021, witnessing a decline of approximately 9% month-to-date as of Sept. 26.

The security and aerospace company faces mounting pressure due to the looming risk of a U.S. government shutdown that could materialize on Oct. 1 if Republicans and Democrats fail to reach a last-minute agreement.

In a recent note, Moody’s Investors Service cautioned that a U.S. government shutdown could negatively impact certain defense service contractors. Delays in allocating funds to agencies such as the Department of Defense or NASA could result in slower accounts receivable turnover, potentially affecting liquidity.

The rating agency also emphasized that essential services, such as national defense, continue to receive funding even during a government shutdown, thereby helping to mitigate the impact of a congressional impasse on defense contractors.

Moody’s also stated that major prime contractors like Lockheed Martin and Leidos Holdings, Inc. LDOS have strong capabilities to manage payment delays effectively, thanks to their substantial cash reserves and access to dependable external credit facilities.

Lockheed Martin operates across four segments: aeronautics, missiles and fire control, rotary and mission systems, and space. The defense giant primarily serves the U.S. government and engages in foreign military sales contracted through the U.S. government.

Currently, the company employs over 116,000 individuals, with its revenues having reached a record high of $67 billion over the last 12 months as of June 2023.

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How Are Lockheed Martin Shares Performing?

Shares of Lockheed Martin are on track for their fourth consecutive session of losses, marking the second consecutive week of declines and the third negative month this year.

The stock is currently trading at levels last seen in mid-October 2022.

Lockheed Martin’s performance in September mirrors that of the industry, with the iShares U.S. Aerospace & Defense ETF ITA also registering a 9% decline.

The peak in 2023 was reached in April at $508 per share, after which Lockheed Martin embarked on a downward trajectory, with a temporary spike in July when it reached $480.

Lockheed Martin reported earnings per share of $6.73 in the second quarter of the year, surpassing estimates of $6.45, and quarterly revenues of $16.7 billion, exceeding Street estimates of $15.9 billion.

The stock is now down 20% from the April 2023 highs, effectively entering a bear market.

Wall Street analysts maintain an average one-year price target of $499 per share, which is 22% higher than current levels. However, out of 22 accredited analysts, 15 rate the stock as “Hold.”

Price Action: Shares of Lockheed Martin fell 1% on Tuesday to $408.75.

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