Lockheed Martin Corp (LMT) Valuation

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Company Profile (obtained from Google Finance): Lockheed Martin Corporation is a global security company that is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems and products. The Company provides a range of management, engineering, technical, scientific, logistic and information services. It serves both domestic and international customers with products and services that have defense, civil and commercial applications, with its principal customers being agencies of the United States Government. The Company operates in four segments: Electronic Systems, Information Systems and Global Services (IS&GS), Aeronautics and Space Systems. In September 2008, Lockheed Martin Corporation acquired Aculight Corporation. In January 2009, the Company completed its acquisition of Universal Systems & Technology, Inc. (UNITECH).In August 2009, the Company completed its acquisition of Gyrocam Systems LLC.

ModernGraham Comments: None at this time.

Defensive and Enterprising Investor Tests:

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – PASS
6. Moderate PEmg ratio – PEmg is less than 20 – PASS
7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – FAIL

Enterprising Investor – must pass at least 4 of the following 5 tests: Score = 3/5

1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
3. Earnings Stability – positive earnings per share for at least 5 years – PASS
4. Dividend Record – currently pays a dividend – PASS
5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary:

• Last Updated    11/2/2009
• MG Value    $272
• MG Opinion    Undervalued
• Value Based on 3% Growth    $102
• Value Based on 0% Growth    $60
• Market Implied Growth Rate    0.64%
• Net Current Asset Value (NCAV)    -$52.94
• PEmg    9.77
• Current Ratio    1.07
• PB Ratio    8.36

Key Data:

Balance Sheet – 9/27/2009

• Current Assets    $12,443,000,000
• Current Liabilities    $11,583,000,000
• Total Debt    $3,563,000,000
• Total Assets    $35,742,000,000
• Intangible Assets    $338,000,000
• Goodwill    $9,944,000,000
• Total Liabilities    $32,602,000,000
• Outstanding Shares    380,780,000

Earnings Per Share – Diluted

• 2009 (estimate)    $7.47
• 2008    $7.86
• 2007    $7.10
• 2006    $5.80
• 2005    $4.09
• 2004    $2.83
• 2003    $2.34
• 2002    $1.18
• 2001    $0.10
• 2000    -$1.19
• 1999    $1.90

Earnings Per Share – Modern Graham

• 2009 (estimate)    $7.05
• 2008    $6.41
• 2007    $5.26
• 2006    $3.98
• 2005    $2.75
• 2004    $1.74

Valuation History:

• 11/2/09 – Value $272, Actual Price $69.30, Undervalued & Speculative