Lockheed Martin’s Second-Quarter Results: F-35 Jet Fighter’s Impact

Investors eagerly await Lockheed Martin’s upcoming second-quarter results, hoping for positive news regarding the F-35 jet fighter. This crucial update is set to be released on Tuesday morning.

Financial Expectations

Analysts on Wall Street have estimated that earnings per share for this quarter will be around $6.45, with sales totaling $15.9 billion. These figures will be compared to the adjusted earnings per share of $6.43 and sales of $15.1 billion reported in the first quarter of 2023.

F-35 Jet Fighter Focus

Delays in F-35 jet fighter deliveries have raised concerns, potentially affecting the company’s performance in the latter half of 2023. The Pentagon has reportedly paused accepting F-35 aircraft equipped with Technology Refresh 3 (TR-3) upgrades until testing of the TR-3 capability is complete. Analyst Kristine Liwag from Morgan Stanley explains that this shortage could result in a significant $440 million headwind to Lockheed’s 2023 free cash flow, as it could lead to a shortfall of approximately 55 aircraft deliveries compared to their initial target range of 147 to 153.

Cash Flow Expectations

Lockheed Martin expects its 2023 free cash flow to reach approximately $6.2 billion. However, the financial models of analysts on Wall Street currently predict a slightly higher value of around $6.3 billion.

The company has not yet responded to requests for comments about the F-35 and its potential impact on the second quarter results.

Concerns about Lockheed Martin’s Cash Flow

Lockheed Martin’s stock has been experiencing a lack of momentum, largely due to concerns surrounding cash flow. While the S&P 500 and Dow Jones Industrial Average have seen gains, Lockheed shares have declined approximately 3% since the beginning of the year. However, there is some positive news for the company as their stock saw a 2% rise on Monday, closing at $473.60.

Decrease in F-35 Jet Deliveries

In the first quarter of 2023, Lockheed Martin delivered only five F-35 jets, compared to the 26 delivered in the same period of 2022. This slowdown has raised questions about the company’s delivery capabilities. Liwag, an analyst, predicts that deliveries for the second quarter will total around 40 units.

Analyst Outlook

Liwag rates Lockheed shares as a “Hold” and sets a target price of $532. Similarly, Baird analyst Peter Arment also rates the shares as a “Hold” with a price target of $513. According to Arment, the company’s recent share repurchases may offset some of the challenges in profitability caused by delayed engine shipments associated with the F-35 program.

Potential Upside for Lockheed Stock

Despite recent underperformance, even maintaining its current financial forecasts could boost the stock’s price if there is visible progress in F-35 jet deliveries. This suggests that investors may react positively to any signs of improvement from management.

Analyst Coverage

Around 31% of analysts covering Lockheed stock rate it as a “Buy”. This figure is lower than the average “Buy” rating ratio for stocks in the S&P 500, which stands at approximately 55%. The average analyst price target for Lockheed shares is around $505.

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