Summary
- Lockheed Martin has a record backlog of ~147B and it’s continuing to win more contracts over time.
- It has a stable and predictable revenue growth in the mid-single digits and solid earnings growth.
- Lockheed Martin has returned almost 15.7B to shareholders since 2017 in the form of dividends and share buybacks. Its dividend yield currently stands at 3.1% making it a great investment.
- The recent acquisition of Aerojet Rocketdyne should generate cost and revenue synergies and help it integrate Aerojet Rocketdyne’s products more effectively into its supply chain.
Lockheed Martin (LMT) is the top defense contractor right now with its crown jewel being the F-35 Fifth Generation Stealth Fighter program. Several of its other products are very critical to the defense of its customers and long term contracts attest to their importance. The pandemic caused supply chain issues delaying the production of some products but its record backlog and demand for its products from customers are still intact. The price declines seen are therefore temporary and will revert back to normal soon once the pandemic is over. It is a great investment below $350 and will soar higher in the coming months.
Business Segments
Lockheed Martin has a wide variety of military products that includes advanced military aircrafts, missiles, missile defense systems, helicopters, space transportation systems, satellites etc. It operates in the following four business segments:
1. Aeronautics
The top revenue generating unit, it's engaged in the design, manufacture and support of advanced military aircraft and unmanned air vehicles. Its programs include the F-35 Lightning II Joint Strike Fighter, F-22 Raptor, F-16 Fighting Falcon and the C-130 Hercules. The F-35 is the most important program and generates the majority of revenue for both the unit and the company.
2. Missiles and Fire Control (MFC)
The MFC unit provides air and missile defense systems, tactical missiles, fire control systems and other services. Some of its major programs include the Patriot Advanced Capability-3 (PAC-3) advanced defensive missile, Terminal High Altitude Area Defense (THAAD) transportable defensive missile system, several missile launch programs, hypersonic strike weapons and logistical support services.
3. Rotary and Mission Systems (RMS)
The RMS unit is involved in the design, manufacture and support of military and commercial helicopters, ship and submarine mission and combat systems, sea and land-based missile defense systems, radar systems and other services. Its popular programs include the Black Hawk and Sea Hawk Helicopters, the Aegis Combat System, CH-53K King Stallion Helicopter etc.
4. Space
This unit engages in the design, development and production of satellites, space transportation systems, and strategic, advanced strike and defensive systems. Its major programs include the Orion Multi-Purpose Crew Vehicle for NASA, GPS III Satellite system for the U.S. Air Force, hypersonic programs and secure communications satellites.
