Stock Wars: Boeing Vs. Lockheed Martin

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector with the goal of determining which company is the better investment.

This week, the duel is between two of the world’s major aviation corporations: Boeing Company BA and Lockheed Martin Corporation LMT.

The Case For Boeing: This company traces its heritage to lumber company executive William Boeing, who became enchanted with manned flight after witnessing an aircraft presentation at the 1909 Alaska-Yukon-Pacific Exposition. Seven years later, Boeing teamed with U.S. Commander George Conrad Westervelt to create the B&W Seaplane under the corporate banner of Aero Products Co.

Today, Boeing develops, manufactures and services commercial airplanes, defense products and space systems for customers in more than 150 countries. The company, which has been publicly traded since 1962, has four key segments: commercial airplanes, defense-space-security, global services and Boeing Capital.

Among its recent corporate developments, the Chicago-headquartered Boeing announced it generated more than $2 billion in online orders last year, a company record, with nearly 70,000 parts products sold to commercial and government customers.

Last month, it launched the new 777-8 Freighter and expanded its 777X and freighter families of jetliners with an order for up to 50 aircraft from Qatar Airways. Over the past three months, Boeing has announced orders from carriers including United Parcel Service, Inc. UPS, DHL Express, Allegiant Travel Company ALGT Atlas Air Worldwide Holdings, Inc. AAWW, China Airlines, Singapore Airlines ADR SINGY, Emirates, Saudia, Air Tanzania and Akasa Air.

But the company also shouldered some troublesome news on Feb. 15 when the Federal Aviation Administration announced it would retain the power to approve Boeing 787 Dreamliner aircraft for flight rather than return that authority to the company, which has not delivered any new Dreamliner aircraft since last May due to production flaws. The FAA added Boeing would regain that authority once 787 deliveries resumed and the aircraft passed final inspections.

“This will allow the agency to confirm the effectiveness of measures Boeing has undertaken to improve the 787 manufacturing process,” the FAA said in a statement.

In its most recent earnings report, fourth-quarter data published on Jan. 26, Boeing recorded $14.79 billion in revenue, down from $15.3 billion one year earlier, with a net loss of $4.16 billion, down from fourth-quarter 2020 net loss of $8.43 billion. Year-over-year revenue declines were recorded across Boeing’s commercial airplanes and defense-space-security segments while its global services and Boeing Capital segments recorded year-over-year revenue upswings.

Boeing closed the fourth quarter with a GAAP loss per share of -$7.02 and core (non-GAAP) loss per share of -$7.69. But on the positive side, the fourth quarter closed with a positive operating cash flow of $716 million compared to the previous year’s $4 billion in red ink.

Boeing President and CEO David Calhoun acknowledged that “2021 was a rebuilding year for us” and highlighted the positive cash flow and increased 737 Max production and deliveries while admitting the 787 program was a work in progress.

“While this continues to impact our near-term results, it is the right approach to building stability and predictability as demand returns for the long term,” Calhoun said. “Across the enterprise, we remain focused on safety and quality as we deliver for our customers and invest in our people and in our sustainable future.”

Boeing shares opened for trading on Wednesday at $217.64, which is sandwiched between its 52-week range of $183.77 and $278.57.

Related Link: The complete Stock Wars series

The Case For Lockheed Martin: This company emerged in 1995 from a $10 billion merger between Lockheed Corporation (founded in 1926) and The Martin Marietta Corporation (founded in 1961 through the merger of Glenn L. Martin Company and American-Marietta Corporation).

Today, the Bethesda, Maryland-based company operates through four segments — aeronautics, missiles and fire control, rotary and mission systems, and space — and its primary customers are the U.S. government and foreign military agencies.

This week saw Lockheed Martin score a major stroke of good news with three NASA contracts related to the agency’s Mars Sample Return program and acknowledged the disappointment of terminating its planned acquisition of Aerojet Rocketdyne Holdings Inc. AJRD after the U.S. Federal Trade Commission sued to block the transaction from proceeding.

The company recently secured aircraft contracts with the militaries in Japan, Finland, Egypt and Colombia, and it was part of the historic Christmas Day launch of the James Webb Space Telescope with the inclusion of its Near Infrared Camera as Webb's primary imager.

In its most recent quarterly earnings report, the fourth quarter data published on Jan. 25, Lockheed Martin recorded net sales of $17.7 billion, up from the previous year’s $17 billion, and net earnings of $2 billion versus $1.79 billion one year earlier. All four of the company’s segments recorded year-over-year net sales gains while the quarter concluded with diluted earnings per share of $7.47, up from the previous year’s $6.38.

“We closed the year on a strong note with solid growth in fourth-quarter sales, segment operating profit, and earnings per share, while cash exceeded our projections as we delivered on our customer commitments and drove strong execution,” said Lockheed Martin Chairman, President and CEO James Taiclet, who promised continued investments in “the many emerging growth opportunities ahead — from new aircraft competitions around the world, to our classified portfolio, to solid demand for our signature programs, to emerging technologies like hypersonics.”

Lockheed Martin shares opened for trading on Wednesday at $382.05, which is at the higher end of its 52-week range of $324.23 to $398.85.

The Verdict: Both companies have experienced their respective shares of highs and lows recently, with the highs coming from the companies’ technological innovations and peerless sales channels while the lows are shaped by unsympathetic government agencies — the FAA for Boeing, the FTC for Lockheed Martin.

Boeing’s fourth quarter was a rougher year-over-year journey, which is understandable when one considers the headaches experienced by the commercial airlines sector — although it has a problem of its own making with the 787 Dreamliners. In fact, one of its major clients, American Airlines Group Inc AAL, was forced to reduce its summertime international scheduling due to delays in Dreamliner production. Lockheed Martin, with a governmental client base, was mostly buffered against the COVID-19 pandemic-era tumult experienced in the private sector.

As the Dreamliner situation created something of a nightmare for Boeing, we’ll call this Stock Wars duel in Lockheed Martin’s favor. But when Boeing is able to rectify the Dreamliner woes, a rematch between these two companies will certainly be in order.

Photo: ArtTower / Pixabay