Lockheed Martin Corporation (LMT) Is a Trending Stock: Facts to Know Before Betting on It

Lockheed Martin Corporation (LMT) Is a Trending Stock: Facts to Know Before Betting on It

Updated: 1 month, 1 day, 23 hours, 48 minutes, 19 seconds ago

Lockheed Martin (LMT) is one of the stocks most watched by Zacks.com visitors lately. So, it might be a good idea to review some of the factors that might affect the near-term performance of the stock.

Over the past month, shares of this aerospace and defense company have returned +15.6%, compared to the Zacks S&P 500 composite's +5.4% change. During this period, the Zacks Aerospace - Defense industry, which Lockheed falls in, has gained 10.6%. The key question now is: What could be the stock's future direction?

While media releases or rumors about a substantial change in a company's business prospects usually make its stock 'trending' and lead to an immediate price change, there are always some fundamental facts that eventually dominate the buy-and-hold decision-making.

Revisions to Earnings Estimates

Here at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

We essentially look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest business trends. And if earnings estimates go up for a company, the fair value for its stock goes up. A higher fair value than the current market price drives investors' interest in buying the stock, leading to its price moving higher. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For the current quarter, Lockheed is expected to post earnings of $7.40 per share, indicating a change of +2.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.7% over the last 30 days.

For the current fiscal year, the consensus earnings estimate of $21.67 points to a change of -4.2% from the prior year. Over the last 30 days, this estimate has changed +0.6%.

For the next fiscal year, the consensus earnings estimate of $27.75 indicates a change of +28.1% from what Lockheed is expected to report a year ago. Over the past month, the estimate has changed -2%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Lockheed is rated Zacks Rank #3 (Hold).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

Even though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.

In the case of Lockheed, the consensus sales estimate of $18.21 billion for the current quarter points to a year-over-year change of +2.7%. The $65.24 billion and $66.18 billion estimates for the current and next fiscal years indicate changes of -2.7% and +1.4%, respectively.

Last Reported Results and Surprise History

Lockheed reported revenues of $16.58 billion in the last reported quarter, representing a year-over-year change of +3.5%. EPS of $6.87 for the same period compares with $6.66 a year ago.

Compared to the Zacks Consensus Estimate of $16.82 billion, the reported revenues represent a surprise of -1.43%. The EPS surprise was +4.41%.

The company beat consensus EPS estimates in each of the trailing four quarters. The company topped consensus revenue estimates just once over this period.

Valuation

No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which evaluates both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on), making it helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Lockheed is graded B on this front, indicating that it is trading at a discount to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Lockheed. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

This Little-Known Semiconductor Stock Could Be Your Portfolio’s Hedge Against Inflation

Everyone uses semiconductors. But only a small number of people know what they are and what they do. If you use a smartphone, computer, microwave, digital camera or refrigerator (and that’s just the tip of the iceberg), you have a need for semiconductors. That’s why their importance can’t be overstated and their disruption in the supply chain has such a global effect. But every cloud has a silver lining. Shockwaves to the international supply chain from the global pandemic have unearthed a tremendous opportunity for investors. And today, Zacks' leading stock strategist is revealing the one semiconductor stock that stands to gain the most in a new FREE report. It's yours at no cost and with no obligation.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Lockheed Martin Corporation (LMT): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.