Lockheed Martin (LMT) is a defense prime contractor with key businesses in Aeronautics (F-35, F-16, F-22 programs), mission systems (cybersecurity and surveillance) and missiles, suggests John Eade, analyst with the leading independent research firm, Argus Research.
With a Republican in the White House, the outlook for defense spending has brightened and is a far cry from the days of sequestration.
Congress recently easily passed a $717 billion defense spending package for FY19. In addition, President Trump is urging U.S. allies to beef up their defense spending.
The company has a record of double-digit dividend hikes, including a 10% increase in September 2018. The double-digit hike underscores LMT’s financial strength, strong focus on shareholder returns, and positive growth outlook.
Lockheed is a well-managed company with a long record of market outperformance. Management consistently sets conservative guidance and raises its outlook as the year progresses. Returns have topped the industry ETF IYJ over trailing one-year and five-year periods.
The shares are attractively valued compared to the historical record. They are trading 18% below their all-time high amid trade and tariff concerns.
The projected 2019 P/E of 17 is toward the low end of historical range of 15-24. The dividend yield of 3.0% is at high end of the industry range, signaling value. Our 12-month target price is $385 per share.
