Lockheed Martin's Greatest Upside Potential Is In Space: Analyst Sees Dividend Hikes, Buyback Top Ups

Deutsche Bank analyst Scott Deuschle maintains Lockheed Martin Corporation LMT with a Buy, raising the price forecast from $600 to $620.

The analyst suggests that Lockheed Martin likely prefunds its pension in the fourth quarter, although the company may delay a formal announcement until after it’s completed.

Deuschle adds that the associated debt issuance for this funding is expected to occur sooner.

The analyst forecasts third-quarter EPS of $6.70, approximately 4% above the Street’s estimate of $6.47.

Deuschle sees revenue of around $17.4 billion, which is $100 million below the Street’s expectation, as the analyst incorporates the $500 million F-35 contract delay impact at Aeronautics, which is not fully reflected in the Street’s projections.

The analyst identifies the greatest upside potential in Space, noting that underlying margins excluding United Launch Alliance (ULA) are expected to decline significantly in the second half.

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This outlook seems conservative, considering that two major contracts—Orion and OPIR—are entering a highly mature phase of their production lifecycle.

The analyst projects a third-quarter revenue beat, which may lead to an upward revision of the full-year revenue guidance, potentially nearing $72 billion.

Deuschle also sees a 1%-2% increase to the midpoint of the full-year segment EBIT guidance, especially if EBIT upside is realized in Space during the third quarter, as seen in the first half.

The analyst sees the company offer some indication for 2025 financial trends.

Given the firm’s conservative track record, the analyst sees the company is likely to project approximately 3% revenue growth and reiterates its target for 10-20 basis points of margin expansion.

Deuschle also projects a dividend increase announcement ahead of earnings, and the buyback authorization will likely be topped up.

Price Action: LMT shares are trading lower by 0.29% to $601.79 at last check Thursday.

Photo via Shutterstock

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