Stock Analysis
Ticker: $LMT
Stock Price: $352.41
Sector: Industrials | Aerospace & Defense
Market Cap: 98 B

Forward P/E: 13.40
Rev Q/Q: 8.70%

Dividend Per Share: $10.40
Current Div Yield: 2.97%
Payout Ratio: 41%
5-Year Dividend Growth: 10%

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Lockheed has raised its dividends for 17 years consecutively

Overview

Lockheed Martin, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. 

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Business Summary

Founded in 1912, Lockheed Martin is the world’s largest defense contractor and supplier of fighter aircraft. Probably best known for its F-35 fighter jet, Lockheed has four major divisions that combined to generate $60 billion in revenue last year.

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Revenue is split as follows:

Aeronautics 40% of sales
Missiles and Fire Control 16% of sales
Rotary and Mission Systems 26% of sales
Space Systems 18% of sales

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The majority of Lockheed Martin's business is with the U.S. government, accounting for 70% of sales

International governments account for another 28% of Lockheed's sales

And finally, global commercial clients account for only 2% of revenue

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Lockheed is in a unique position in which its largest customer by far is also the country that spends BY FAR the most on defense spending.

In fact, the U.S. government routinely spends over $600 billion annually on defense to maintain its as a global superpower

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It's important to note when covering $LMT the importance of the F35 to their business, and the reliability it brings to the business, and the cash flow it provides.

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In the late 1990s, Lockheed spent $1 billion to design a joint strike fighter and won the largest contract in government history.

The prize was the right to develop, and service the F-35
A contract worth $1.5 trillion that is set to run until 2070!
(Roughly 27% of sales)

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Risks
While defense will always be a hot topic, it's also a rather subjective one.

The nature of defense is that it's rarely used, and no one knows how significant a threat is until one arises

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As a result, if the opinions of those in the government were to change on defense spending, the company's growth in revenues could decline at any moment or remain flat.

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Another risk to consider is Lockheed's high dependence on a single product. (F35)
While the fact that this product is locked up in a long-term contract, if any issues were to arise, (See the Boeing 737 Max) the company could face extreme headwinds)

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To close, Lockheed looks extremely attractive on both the historical valuation and sector valuation.

While the Defense sector may be under pressure due to the potential change of control in the government

I see it unlikely that Defense spending is cut in any major way

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As the largest defense contractor in the world, Lockheed enjoys competitive advantages in highly-specialized industries

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Creating a wide economic moat that likely no company will ever be able to truly compete with

The dividend appears extremely safe and growth in sales should be consistent for years to come

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