Analyst Name
Moatesem Itayem
Company
Lockheed Martin Corporation
Current Stock Price
$188.65 on June 26 2015
Recommendation
Buy
Forecasted Price
$192.43 on July 03 2015
Executive Summary
Lockheed Martin Corporation is a global security and aerospace company incorporated on
29th August, 1994. Lockheed Martin Corporation employs about 112,000 people and is
engaged in several fields such as in research, design, manufacture, development and
integration of products related to aerospace industry. Basically LMC operate in five segments
i.e. Information Systems & Global Solutions, Aeronautics, Mission Systems and Training,
Missiles and Fire Control, and Space Systems. Lockheed Martin Corporation provides a
range of services i.e. management, engineering, scientific, technical, information and logistics
services. LMC’s areas of focus are space, defence, intelligence, information technology,
homeland security, and cyber security. Lockheed Martin Corporation serves both US and
international customers with product and services i.e. civil, defence, and commercial
applications. Out of company’s total sale, 82% revenue generates from US government
projects, 17% come from international customers, and 1 percent from other US commercial
customers. Lockheed Martin Corporation’s basic mission is to solve complex challenges,
advanced scientific discovery and delivering innovative solutions to help their customers to
keep safe and to provide them essential services.
Customer Base of LMC
Being a global security, information technology and aerospace company, majority of
Lockheed Martin Corporation business is with US department of defence and United States
federal government agencies. Lockheed martin is largest provider of system integration, IT
services, and training to United States government. The remaining portion company business
is comprised of international government product, services and platforms.
Quantitative Analysis
Business Description or Company Profile:
Lockheed Martin Corporation operating units are organized in following five segments or
business areas.
Aeronautics:
LMC Aeronautics is engaged in research, design, manufacture, and sustainment and up-
gradation of advanced military aircrafts including combat and air mobility aircraft and related
technologies. Company’s main programs include F-35 Lightning II Joint Strike Fighter that is
an international multi variant, multi role, fifth generation stealth fighter plane, F-22 Raptor
which is an air dominance 5th generation stealth fighter, C-130 Hercules which is an
international tactical airlifter, and C-5M Super Galaxy which is an airlifter (Annual Report,
2014). In 2014 LMC recorded sales of an approximately $14.9 billion dollars from
Aeronautics segment which includes tactical aircraft, aeronautical research, airlift and
development lines of business.
Mission System and Training:
There is an approximately sale of $7.1 billion from mission system and training segment.
This segment includes naval systems, simulation and training, platform integration and
energy program lines of business. It provide several types of services such as ship and
submarine mission, radar systems, simulation and training services, littoral combat ship and
sensors for aircrafts.
Information Systems and Global Solutions:
In 2014, there was a sale of $7.8 billion from this subsidiary. This segment provides advance
technology system and expertise, management services, and integrated information
technology solutions across a range of applications for defence, civil, and for other
Government customers. Similarly this segment of company support the needs of customer in
data analytics, air traffic management and cyber security.
Missiles and Fire Control:
This segment of company provides air and missile defence systems, air-to-ground precision
strike weapon systems, tactical missiles, logistics and other types of technical services,
mission operation support, fire control systems, readiness integration services, engineering
support and manned and unmanned ground vehicles. In 2014 there was a sale of
approximately $7.7 billion from this segment (Annual Report, 2014). Terminal high altitude
area defence system, PAC-3 missiles, joint light tactical vehicle are some of its high profile
programs.
Space Systems: This segment is engaged in research and development, production of satellite,
engineering, defensive and strategic missiles systems and space transportation systems.
Company main programs include Space Based Infrared System, Global Positioning System
III, Mobile User Objective System and Geostationary Operational Environmental Satellite R-
Series.
Outlook of Industry:
Lockheed Martin Corporation faced a decline period in 2013. In 3Q14 four out of its five
segments revenue declined. For example aeronautics revenue declined by 2 percent as
compared to 3Q13. Similarly revenue for information System and Global System declined by
5 percent and reached to $ 1.95 billion. Similarly MFC i.e. Missile and Fire Control segment
of Lockheed Martin Corporation revenue declined by 5 percent and another segment named
MST declined by 1 percent. The only subsidiary or segment which reported growth was space
system
In April 2015, Lockheed Martin Corporation reported a first quarter profit that declined to
878 million dollar from 933 million dollar in a year earlier period which beat the FactSet
consensus estimate of 2.50 dollar of a share. Similarly defence contractor and aerospace
subsidiary of Lockheed Martin Corporation sale also fell down to 10.11 billion dollar from
10.65 billion dollar. “For 2015 the company raised it EPS outlook to a range of $10.85 to
$11.15 from $10.80 to $11.10, but affirmed its sales outlook of $43.5 billion to $45 billion”
(Kilgore, 2015). The stock that inched up 0.9 % in light premarket trade, get advanced 2.2
percent year to date on the other hand S&P gained about 2 percent.
Competitors:
