Why Lockheed Martin (LMT) Might Be a Smart Investment Right Now

[goodmore]

Hey r/investing,

With some recent developments in the defense sector, I think it’s worth taking a closer look at Lockheed Martin (LMT). Here’s why:

1. New Contracts: LMT just bagged a $175M contract for the F-35 Fighter Aircraft, showcasing its ongoing dominance in the aerospace sector. This is on top of a massive $443M contract for the Black Hawk helicopter. These contracts not only boost revenue but also reaffirm Lockheed’s position as a top defense contractor. If this all wasn’t enough, the House and Senate have just approved a $886.3 billion defense policy bill, and Lockheed Martin, being a leading defense contractor, often benefits from increased defense spending.
2. Stable Revenue Stream: Lockheed’s consistent government contracts, especially from the U.S. Department of Defense, provide a stable and predictable revenue stream. In an uncertain economic climate, this stability is gold.
3. Innovation Leader: LMT is at the forefront of defense technology. From advanced fighter jets to cutting-edge missile systems, their focus on R&D means they’re ahead of the curve.
4. Dividend Payouts: Lockheed’s history of paying dividends is attractive. They’ve been known to increase their dividend payouts.
5. Global Security Demand: With rising global security challenges, the demand for defense equipment isn’t going down anytime soon. Lockheed, with its diverse range of defense products, is well-positioned to meet this demand.
6. Economic Resilience: Defense stocks like LMT tend to be more resilient to economic downturns. Defense spending often remains stable or even increases, regardless of the economic climate.

However, it’s not all sunshine and rainbows. There are risks, like dependency on government policies and global political dynamics. But overall, LMT’s recent contract wins and its strong position in the defense sector make it a stock worth considering.

What do you all think? Is LMT a good long-term play, or are there better options out there in the defense sector?

Disclaimer: This is not financial advice. Always do your own research before investing.

Edit: grammar

 

[skelendke]

@goodmore $175M for the F-35 is like $0.15 in the grand scheme of the F-35’s life cycle costs.

 

[bobcatukbb]

@skelendke Ya not long ago Lockhead was replaced by Leidos on a multi billion DoD contract.

 

[escapewoman]

@bobcatukbb I was wondering how a Pizza company got all those corporate buildings around DC

 

[saimonsz1]

@bobcatukbb Didn’t they merge in 2016?

 

[resjudicata]

@saimonsz1 They didn’t merge, LM divested its services side of the house to focus on a product manufacturing driven platform model and they got out of the staff augmentation business. Several years earlier SAIC did the same and spun off into Leidos, the divestiture from LM was about 18K people and $9B in value, for two years Leidos was 51% LM owned. The type of sale was referenced as a “Reverse Morris Trust” it was quite a complex transaction to support from an operational/functional perspective.

 

[joshua28]

@skelendke

$175M contract for the F-35 Fighter Aircraft, showcasing its ongoing dominance in the aerospace sector.

More like ongoing sunk cost funding

 

[gaila]

@skelendke 1 f35 is about 135mil. So, there's not much of a contract.

 

[entiel]

@gaila Doesn't that include R&D cost which is paid for at this point?

 

[gaila]

@entiel Not really. They cost of each unit is still the published price.

You don't think the company is going to just eat the R&D cost, do you?

 

[entiel]

@gaila That's what I thought which means the marginal cost goes down

 

[goodmore]

@skelendke The $175M contract I mentioned isn’t the only one, it’s just the most recent. They were also awarded a $996 million contract for the Mark21A Reentry Vehicle (Mk21A) program back in early November; and they recently delivered their first F-35 to Belgium.

There’s a lot going on with LMT, but I haven’t seen many people talking about it

 

[skelendke]

@goodmore The F-35 is the future of the entire company. It’s a $1.3+ trillion program and LM is in primary charge of the sustainment of the aircraft which makes up the majority of that $1.3+ trillion. You will see F-35 contracts weekly for LM. The US government is trying to gain more control over sustainment moving forward, so that is what you should keep your eye on. Can they get more control? That remains to be seen…

 

[goodmore]

@skelendke That’s great insight!

 

[phoenix77]

@skelendke I think the future is the nuclear powered spaceship they have been contracted to build, especially if they start making multiple ones for space force.

 

[ivory_lamb]

@skelendke Yeah this entire analysis shows a total ignorance for the scope of contracts and work LM performs, what they consider growth areas, and completely fails to even mention book to bill ratio. Poster is ignorant, but ignorance is bliss. Full send on LM.

 

[redletters]

@goodmore The issue with defense stock is that they are not great compounders. Since the revenue is largely dictated by the federal budget, it grows more in line with GDP than with the growth of the market as a whole. so growth is limited in the long run.
that’s one reason why I won’t be buying it, but you’ve listed some good reasons here

 

[jackwallar1000]

@redletters That’s a great take. Appreciate the insight. If we went to war (like, wwii style war) I assume this wouldn’t be necessarily hold true, but then we’d have bigger problems.

 

[aventador]

@jackwallar1000 What would happen to defense manufacturers during a peer conflict war?

 

[jackwallar1000]

@aventador I think this falls into the “we’ll have bigger problems than that” category