Lockheed Martin: LMT Stock Could Target $300

Lockheed Martin to Benefit from Trump Military AspirationsLockheed Martin to Benefit from Trump Military Aspirations

U.S. President Donald Trump is planning to spend big on building up the U.S. military to a rate probably not seen since the Cold War many decades ago. The expected surge in the defense budget will likely provide a great tailwind for defense contractors such as Lockheed Martin Corporation (NYSE:LMT) over the next four years and longer.

Whether the Trump era will become known as the golden years for the defense sector is unknown, but there is a high probability that military spending will surge.

Lockheed Martin is arguably the “best of breed” in the defense space, developing advanced next-generation technologies for warfare, including fighter jets, missiles, defense systems, smart bombs, and cyber technologies.

LMT stock is probably best known for its fifth-generation “F-35” fighter. If you hadn’t heard about it before, I’m sure you have by now, given the somewhat-recent tweets from Trump accusing Lockheed Martin of overcharging for the planes.


The newly minted Defense Secretary James Mattis is now looking into the cost of the F-35 and investigating whether a lower price point can be achieved, or whether switching to the less-advanced Boeing “F/A-18E” or “F/A-18F Super Hornet” fighter jets would suffice.

Based on what has come out of Lockheed Martin, the company appears to be compromising on a lower price point for the F-35. This is something that is necessary, as Lockheed Martin cannot afford to lose its massive order, given how expensive the F-35 project has become. The folks at Lockheed Martin will do what is necessary to please Trump, and attempt to save LMT stock.

Given that the company’s “Aeronautics” business accounted for about 38% of total sales in 2016, followed by “Missiles and Fire Controls” at 14%, the F-35 program is critical for LMT stock. (Source: “Lockheed Martin Reports Fourth Quarter and Full Year 2016 Results,” Lockheed Martin Corporation, January 24, 2017.)

My Bullish Case for LMT Stock

Based on the assumption that the F-35 program is safe, LMT stock could be moving into a period of more gains in the years ahead, as the fighter jets prove it is tops in the sky.

Wall Street is becoming more bullish on Lockheed Martin stock. There were seven earnings per share (EPS) upward revisions for 2017 and six higher revisions for 2018 during the past 30 days. (Source: “Lockheed Martin Corporation (LMT),” Yahoo! Finance, last accessed January 27, 2017.)

The monthly chart reflects the strong upward push in LMT stock since breaking out at around $67.00 in early 2012 and peaking at $270.00.


Chart courtesy of StockCharts.com

A look at the daily chart of LMT stock showed the mixed trading over the past six months. LMT stock is currently trading in a sideways channel, with resistance at $260.00 and support at the 200-day moving average at around $245.00. The relative strength index (RSI) and moving average convergence/divergence (MACD) are both neutral.


Chart courtesy of StockCharts.com

An upside breakout could see Lockheed Martin break back to its previous high at $270.00 and then challenge new highs onward to the $300.00 level.

Much will be dependent on Trump, but his keen desire to build up the military should provide the tailwinds for Lockheed Martin to push higher.