The US State Department is considering approving the sale of HIMARS artillery missile systems to Poland for $10bn. The deal will include 18 launchers and long-range munitions. We were able to learn from a release from State Department officials that providing the weapons to Poland would meet US foreign policy objectives by: "improving the security of a NATO Ally that is a force for political stability and economic progress in Europe". It seems that the manufacturer of this armament could particularly benefit from this contract.
Is Lockheed Martin Corporation the Cyberdyne Systems from "Terminator" movie?
Lockheed Martin Corporation (Lockheed) is one of the largest manufacturers of military equipment and weapons technology in the world. The company was founded in 1912 and is headquartered in Bethesda, Maryland.
Lockheed Martin is a supplier of military combat aircraft (37.7% of revenue), missiles (19.1% of revenue), air and missile defence systems (23.2% of revenue), satellites and space programmes (29.6% of revenue) and other vital systems to militaries and government agencies around the world. The company also researches and develops new technologies related to weapons and security. The comparison to Cyberdyne Systems may at first glance seem exaggerated. Nevertheless, it is one of the three largest companies in the US military sector. To a large extent, it could influence the military destiny of the world.
Lockheed Martin's business model is based on the sale of defence and security products and services. The company's main source of revenue is the sale of military products and weapons technology. The company also earns money by providing maintenance services and upgrades for its products, as well as by working with other companies to develop and market new technologies.
Financial situation
The company's shares have risen by more than 23% since the outbreak of the conflict in Ukraine. From the last published report for Q4 2022, we could learn that Lockheed Martin's revenue increased by only 7% year-on-year. Despite the increase in revenue, the company's operating profit fell by 6.6% year-on-year. This appears to have led to the company's net profit margin falling to 8.7% (previously 9.1%), which is still better than the industry average of just 1.9%.
According to analyst firm Zacks: 'Steady contract flows and subsequent backlog growth bolster its long-term revenue prospects. Budgetary provisions tend to boost its business. Yet strains between the U.S. and Turkey, as a result of the latter accepting Russian products, might hurt Lockheed's component supply from that country. Lockheed is facing performance issues concerning some of its products, which, in turn, may hurt its results. Also, an uncertainty revolving around the possible sanction by China on Lockheed might impact the company’.
Including the aforementioned USD 10 billion worth of equipment sales to Poland, the company's revenue growth would be as much as 27%. It seems that this is why the number of 'strong buy' recommendations has increased from three in January to the current seven.
What does Wall Street think of Lockheed Martin's share price?
According to the Market Screener portal, the company has 22 recommendations, and among these, the majority are those with the content: "Hold" and "Buy". The average target price is set at USD 502.3, 7% above the last closing price. The highest target price is at USD 774 and the lowest is USD 334.
Source: Conotoxia MT5, Lockheed, Daily
Grzegorz Dróżdż, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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