Investors in
Lockheed Martin
need some good news about the F-35 jet fighter to get the stock flying.
Tune in Tuesday morning, when Lockheed (ticker: LMT) will report its second-quarter results. Wall Street is looking for earnings per share of $6.45 from $15.9 billion in sales, compared with $6.43 in adjusted earnings per share from $15.1 billion in sales in the first quarter of 2023.
The focus will be on the F-35 jet fighter because deliveries have slowed and could affect the second half of 2023.
“The Pentagon has [in July] reportedly stopped accepting F-35 aircraft fitted with Technology Refresh 3 (TR-3) upgrades until testing of the TR-3 capability is completed,” wrote
Morgan Stanley
analyst Kristine Liwag in a report previewing earnings. “We estimate that a shortage of about 55 aircraft deliveries versus Lockheed’s earlier 147 to 153 target could drive a [roughly] $440 million headwind to 2023 free cash flow.”
Lockheed expects to generate about $6.2 billion in 2023 free cash flow. Wall Street’s financial models currently point to about $6.3 billion. The company didn’t immediately respond to a request for comment about the F-35.
Concern about cash flow is one reason the stock has been going nowhere. Lockheed shares are down about 3% so far this year, while both the
S&P 500
and
Dow Jones Industrial Average
have risen. Lockheed stock rose 2% Monday, closing at $473.60.
The company delivered five F-35 jets in the first quarter of 2023, down from 26 delivered in the first quarter of 2022. Deliveries should come in around 40 units for the second quarter, according to Liwag.
She rates shares at Hold and has a target of $532 for the price. Baird analyst Peter Arment rates shares Hold and has a $513 price target.
“Robust share repurchases in the quarter should partially offset profitability headwinds [caused] by delayed engine shipments associated with F-35,” wrote Arment in a preview note.
Given the stock’s underperformance, the price could get a boost even if management only maintains its financial forecasts, so long as progress in making deliveries of F-35 jets is apparent.
Overall, about 31% of analysts covering Lockheed stock rate the shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target is about $505 a share.
Write to Al Root at [email protected]
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