In part 3 of this special report, Ben Reynolds — editor of Sure Passive Income — looks at Lockheed Martin (LMT), one of the initial stocks recommended in the new advisory service.
Lockheed Martin is the world’s largest defense company. Its largest customer is the U.S. Department of Defense, which represents 60% of its revenue.
Its other customers include international government agencies as well as other agencies within the U.S. government. Lockheed Martin had nearly $60 billion in revenue last year. The stock has a market capitalization of $103 billion.
The company consists of four business segments. The largest segment is Aeronautics, which represents approximately 41% of the company’s sales and consists of military aircraft like the F-35, F-22, F-16 and C-130. Next is the Rotary and Mission Systems segment at 26% of sales, and includes combat ships, naval electronics, and helicopters.
The Missiles and Fire Control segment creates missile defense systems and represents 16% of sales, and the company also manufactures satellites in its Space Systems segment, representing the remaining 17% of company revenue.
The company has barely skipped a beat to start 2020. For the second quarter, net sales increased by 11% to $16.2 billion, while earnings-per-share rose 16% year-over-year.
All four of its business segments increased net sales in the quarter. The Aeronautics segment increased net sales 16% due to increased production of the F-35, combined with higher development, sustainment, and classified contracts.
Meanwhile, Lockheed Martin’s Missiles and Fire Control segment increased sales 14% due to higher sales from High-Mobility Artillery Rocket Systems, Guided Multiple Launch Rocket Systems, Terminal High Altitude Area Defense, and Patriot Advanced Capability-3 volumes.
Rotary and Mission Systems net sales increased 3% on higher volumes for Seahawk and VH-92A programs. Lastly, the Space segment grew sales by 9% as a result of higher volumes in Next Generation Overhead Persistent Infrared and hyper-sonics.
Going forward, there remains ample opportunity for future growth, as Lockheed Martin ended the most recent quarter with a backlog of approximately $150 billion. The company also upped its revenue and earnings forecast for the remainder of 2020, reflecting the positive momentum it has enjoyed to begin the year.
Lockheed Martin sees relatively stable demand each year, even during recessions, as the U.S. and its allies in international regions have a continuing need for defense products and services.
Lockheed Martin has increased its dividend for 18 consecutive years. In September, the company not only increased its dividend by 8.5%, but it also added $1.8 billion to its share repurchase authorization, upping the total buyback authorization to approximately $3 billion.
Lockheed Martin is a very shareholder-friendly company, with a management team that is committed to returning excess cash to shareholders through buybacks and dividends. Lockheed Martin has a 2.8% current dividend yield.
