Finding Security in Lockheed Martin
Lockheed is up about 14% since early August - not an insignificant move for a company of its size.
With the echo from the amplifiers ringing in your head
You smoke the day's last cigarette, remembering what she said"
-Turn The Page (Bob Seger)
I'm a big Bob Seger fan - his induction into the Rock & Roll Hall Of Fame in 2004 was long overdue. Metallica covered Turn The Page in 1998 and did a very respectable job, but Seger's version is still the standard.
That being said, recently and very quietly Merrill Lynch tried to "turn the page" on its research call on Lockheed Martin (LMT). Let's take a walk down memory lane.
It was January 4 of this year, I believe, that Merrill Lynch published its " Run Is Done List". 17 stocks that "exhibited significant out-performance in 2006 but might be at risk of under-performing in early 2007". LMT was trading a whisper short of $90 at the time.
I took issue that evening on the show Fast Money, flat out stating that Merrill Lynch had this one wrong and by February the stock was trading north of $103. I mention this not to take pot shots at Merrill's research department but only to provide context for the latest series of events. On September 18, LMT was upgraded to buy from neutral at Merrill Lynch - harmless enough - but on September 21, Merrill added LMT to its U.S. Focus 1 List. The fact that LMT should have been on its U.S. Focus 1 List all along is not close to the point. I find no mention of the fact that LMT basically went from "run is done" to "Focus 1" without any mention of what has changed in the last nine months. It frankly leaves me scratching my head.
All that being said, I remain a huge fan of Lockheed Martin. It is coming off a 2Q reported in July that handily beat Street estimates. On top of that, it guided its full year EPS to $6.61 - $6.76 versus prior guidance of $6.20-$6.35. Currently trading around 16.50 times trailing and 14.50 times forward earnings, LMT is fairly valued when compared to rivals.
General Dynamics (GD) at 19.25 and 15 respectively and Boeing (BA) at 22.50 and 17 respectively. But keep one thing in mind, Lockheed is up about 14% since early August - not an insignificant move for a company of its size. Although I still think higher prices lie ahead of LMT, I am worried that we may see $98 before we see $108.00
Contrary to some other opinions, I do not think the political climate in the U.S. will have any effect on defense stocks. As a matter of fact, I can make an argument that a Democrat victory for the White House in 2008 is actually bullish for defense stocks as there is no way that they will let their guard down with regard to defense spending.
Outside another Street upgrade, the next catalyst for LMT is its 3Q earnings report on or about October 24. I would be waiting till then or any pullback to the high $90's before I dipped my toe on the buyside. Either way Lockheed Martin should belong smack in the middle of your radar screen regardless of whether its "run is done" or just beginning.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter