Linked here’s a detailed quantitative evaluation of Lockheed Martin Corp. (LMT). Beneath are some highlights from the above linked evaluation:
Firm Description: Lockheed Martin Corp., the world’s largest navy weapons producer, can also be a major provider to NASA and different non-defense authorities companies. LMT receives about 93% of its revenues from international protection gross sales.
Fair Value: In calculating truthful worth, I think about the NPV MMA Differential Truthful Worth together with these 4 calculations of truthful worth, see web page 2 of the linked PDF for an in depth description:
1. Avg. Excessive Yield Value
2. 20-Yr DCF Value
3. Avg. P/E Value
4. Graham Quantity
LMT is buying and selling at a premium to all 4 valuations above. Since LMT’s tangible guide worth will not be significant, a Graham quantity cannot be calculated. When additionally contemplating the NPV MMA Differential, the inventory is buying and selling at a 57.7% premium to its calculated truthful worth of $289.43. LMT didn’t earn any Stars on this part.
Dividend Analytical Data: On this part there are three potential Stars and three key metrics, see web page 2 of the linked PDF for an in depth description:
1. Free Money Move Payout
2. Debt To Whole Capital
3. Key Metrics
4. Dividend Development Fee
5. Years of Div. Development
6. Rolling 4-yr Div. > 15%
LMT earned one Star on this part for 1.) above. A Star was earned because the Free Money Move payout ratio was lower than 60% and there have been no detrimental Free Money Flows over the past 10 years. The corporate has paid a money dividend to shareholders yearly since 1995 and has elevated its dividend funds for 21 consecutive years.
Dividend Income vs. MMA: Why would you assume the fairness threat and put money into a dividend inventory in case you might earn a greater return in a a lot much less dangerous cash market account (MMA) or Treasury bond? This part compares the incomes potential of this inventory with a high yield MMA. Two objects are thought-about on this part, see web page 2 of the linked PDF for an in depth description:
1. NPV MMA Diff.
2. Years to > MMA
The NPV MMA Diff. of the $342 is under the $1,400 goal I search for in a inventory that has elevated dividends so long as LMT has. If LMT grows its dividend at 6.6% per yr, it should take 6 years to equal a MMA yielding an estimated 20-year common price of three.75%.
Friends: The corporate’s peer group contains: Boeing Co. (BA) with a 0.0% yield, Northrop Grumman Company (NOC) with a 1.6% yield and Raytheon Applied sciences Company (RTX) with a 2.7% yield.
Conclusion: LMT didn’t earn any Stars within the Truthful Worth part, earned one Star within the Dividend Analytical Information part and didn’t earn any Stars within the Dividend Revenue vs. MMA part for a complete of 1 Star. This quantitatively ranks LMT as a 1-Star Very Weak inventory.
Utilizing my D4L-PreScreen.xls mannequin, I decided the share value would want to lower to $299.06 earlier than LMT’s NPV MMA Differential elevated to the $1,400 minimal that I search for in a inventory with 21 years of consecutive dividend will increase. At that value the inventory would yield 4.1%.
Resetting the D4L-PreScreen.xls mannequin and fixing for the dividend development price wanted to generate the goal $1,400 NPV MMA Differential, the calculated price is 10.6%. This dividend development price is increased than 6.6% used on this evaluation, thus offering no margin of security. LMT has a risk rating of two.00 which classifies it as a Medium threat inventory.
LMT is the most important protection contractor on the planet and dominates next-generation protection platforms. It owns provide contracts for key packages such because the F-35, which assures the corporate a number of years of income. Regardless of spending cuts, the corporate continues to obtain contracts from the Dept. of Protection. Going ahead, its different product choices, working execution and price discount measures will assist the corporate to maintain its profitability.
For the reason that final evaluate, the corporate’s free money move payout elevated to 52%, from 35%. Its debt to complete capital elevated to 65%, from 49%. LMT is buying and selling at a premium to my calculated truthful worth of $289.43. For now, I’ll look forward to a extra opportune time so as to add to my place.
Disclaimer: Materials introduced right here is for informational functions solely. The above quantitative inventory evaluation, together with the Star score, is mechanically calculated and is predicated on historic data. The evaluation assumes the inventory will carry out sooner or later because it has up to now. That is usually by no means true. Earlier than shopping for or promoting any inventory you ought to do your individual analysis and attain your individual conclusion. See my Disclaimer for extra data.
Full Disclosure: On the time of this writing, I used to be lengthy in LMT (2.7% of my Dividend Development Portfolio).
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