Is the Run Over for LMT Stock?
Lockheed Martin Corporation (NYSE:LMT) stock is feeling a little down. It’s only trading at $242.00 per share. Yet, at the end of April, it closed at a new record of $234.70 per share. The fact that LMT stock has dropped and is still trading in the kind of space astronomers investigate is—if anyone doubted it—yet more evidence of LMT stock’s strength. To quote a famous GMC truck ad campaign, Lockheed Martin stock is like a rock.
Since the start of 2016, Lockheed Martin stock has increased 11.6%. But, there are no significant obstacles on its route to reaching new heights. The median analyst price target for LMT stock was $241.50. Most analysts list it as a “Strong Buy,” a “Buy,” or a “Hold.” The highest target of $273.00 now looks well within the range of one of the company’s famous fighter jets.
Indeed, the Danish government has recommended the purchase of 27 Lockheed Martin “F-35” fighter aircraft. (Source: “Danish government to recommend Lockheed Martin’s F-35 fighter jet – sources,” Reuters, May 11, 2016.) The Danish parliament has to approve the recommendation, which is likely forthcoming. Denmark would become the 11th country to use the F-35 stealth fighter. The United States, Britain, Australia, Turkey, Italy, Norway, the Netherlands, Israel, South Korea, and Japan have already placed orders. The contract with Denmark could be worth upward of $15.0 billion for the more than 30-year lifespan of the plane. (Source: “Denmark nears final decision on controversial fighter jets,” The Local, April 28, 2016.)
Lockheed Martin’s F-35 was competing against tenders from Boeing Co. (NYSE:BA), which offered its “F/A-18” and the “Typhoon,” a European fighter-jet developed by an industrial consortium that includes Airbus.
When a company is as strong a catalyst for investment in the highest technology and innovation as Lockheed Martin, it is virtually bulletproof where government funding is concerned. This being a presidential election year, investors may be hesitant to invest in Lockheed Martin. As the major defense contractor, Lockheed Martin’s investors feel the effects of decisions made in the Oval Office like few others.
Those on the fence over Lockheed Martin stock might consider buying it before it becomes too expensive, though. Neither Donald Trump nor Hillary Clinton is likely to cut spending on programs affecting Lockheed Martin. The recent defense spending bill for fiscal 2015 (beginning October 1) includes 38 new F-35 fighters.
In addition, the company is large and diversified enough that it can benefit from a number of areas.
Opening up to more foreign demand is just one way in which Lockheed Martin is diversifying. The Danish F-35 contract reflects the company’s focus—with the blessing of the U.S. government—to expand the program in order to maximize profits.
And in 2015, Lockheed Martin bought Sikorsky, one of the world’s most prolific helicopter makers, from United Technologies Corporation (NYSE:UTX). Sikorsky has an impressive lineup of military aircraft. Yet, it also has at least two major civilian products, the “S-76” and “S-92” helicopters, which have customers worldwide. Moreover, its famous “C-130 Hercules,” still in production and in demand, is a welcome sight in many disaster zones. It is one of the world’s top planes for humanitarian missions and relief.
In the military market, Lockheed Martin has secured an unprecedented contract with South Korean shipbuilder Daewoo Shipbuilding and Marine Engineering (DSME). LMT will supply electronics and the special systems for a fleet of corvettes known as multi-mission combat ships (MCMs). (Source: “Lockheed Martin, Daewoo partner for combat ships,” UPI, May 2, 2016.)
Simply put, Lockheed Martin stock is diversified enough to benefit moving forward, regardless of who takes the Oval Office next.