Why Lockheed Martin Rallied in October
Strong earnings, along with visibility into longer-term F-35 and missile demand, pushed shares higher.
Lockheed Martin's shares surged 25.1% in October, driven by robust third-quarter earnings and new long-term contracts with the Department of Defense. The aerospace giant surpassed analyst expectations, with revenue up 11.3% to $20.7 billion and diluted earnings per share growing 14.6% to $7.95. Management raised full-year guidance to a revenue range of $80 billion to $82 billion and diluted EPS to $30.35 to $30.75, both above previous estimates.
The Aeronautics division, which manufactures the F-35 fighter jet, and Missiles and Fire Control experienced significant growth, up 13.2% and 24.2% respectively. The Department of Defense finalized a 10-year agreement for 850 F-35s and guaranteed a production capacity of 156 aircraft annually. This long-term commitment provides Lockheed with a sales floor, potentially reducing government outlays.
Analysts, such as Morgan Stanley's Kristine Liwag, raised their price targets, believing the agreements strengthen Lockheed's revenue outlook and reduce cash flow risks. With strong growth in F-35, missile business, and other segments, Lockheed Martin, a dividend-yielding blue chip defense contractor, is seen as a solid long-term investment amid potential political uncertainties.
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