Lockheed Martin recently reported strong Q1 results, with revenues and earnings exceeding street estimates. The company reported revenue of $17.2 billion and earnings of $6.33 per share, compared to consensus estimates of $16.1 billion and $5.80, respectively. The solid quarter was driven by robust demand amid ongoing geopolitical tensions. Despite the positive results, Lockheed Martin’s stock appears to have limited room for growth. The stock has shown gains of 30% from early 2021 to now, but its performance has been inconsistent, underperforming the S&P 500 in 2021 and 2023.
Consistently beating the S&P 500 has been challenging for individual stocks in recent years, including heavyweights in the Industrials sector and megacap stars. In contrast, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the S&P 500 each year. The HQ Portfolio offers better returns with less risk compared to the benchmark index. Given the current macroeconomic uncertainties, such as high oil prices and elevated interest rates, Lockheed Martin may face challenges in outperforming the S&P 500 in the next 12 months. The stock is estimated to have little room for growth, with a valuation of $500 per share, reflecting less than 10% upside from its current levels.
Lockheed Martin’s revenue increased by 14% year-over-year to $17.2 billion in Q1, with its Missiles and Fire Control segment experiencing a 25% sales growth. Other segments also saw positive sales growth, but the consolidated operating margin declined by 170 basis points to 11.8% in Q1. Despite lower operating margins, the company expects 2024 revenue to be between $68.5 and $70.0 billion, with earnings projected to be between $25.65 and $26.35 per share. The uptick in defense spending for some countries, such as the recent $95 billion aid package passed by the U.S. Senate, bodes well for defense stocks like Lockheed Martin.
Lockheed Martin recently secured a multi-year contract worth $17 billion to develop next-generation interceptors to protect the U.S. from intercontinental ballistic missiles, further strengthening its position in the defense industry. While some positive developments may already be priced into Lockheed Martin’s stock, continued geopolitical tensions are likely to keep defense stocks in focus in the near term. From a valuation perspective, the stock may have limited growth potential, but comparing it to its peers can provide valuable insights into its performance. Overall, Lockheed Martin’s solid Q1 performance and positive industry outlook point towards a steady trajectory for the company in the coming months.