Lockheed Martin Corp Valuation – January 2019 $LMT

Company Profile (excerpt from Reuters): Lockheed Martin Corporation, incorporated on August 29, 1994, is a security and aerospace company. The Company is engaged in the research, design, development, manufacture, integration and sustainment of technology systems, products and services. The Company operates through four segments: Aeronautics; Missiles and Fire Control (MFC); Rotary and Mission Systems (RMS), and Space Systems. The Company also provides a range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. Its main areas of focus are in defense, space, intelligence and homeland security. The Company serves both the United States 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.


Downloadable PDF version of this valuation:

ModernGraham Valuation of LMT – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $74,735,778,537 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.11 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 80.05% Pass
6. Moderate PEmg Ratio PEmg < 20 19.56 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 75.23 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.11 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.15 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $13.44
MG Growth Estimate 6.44%
MG Value $287.46
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $194.94
MG Value based on 0% Growth $114.27
Market Implied Growth Rate 5.53%
Current Price $262.92
% of Intrinsic Value 91.46%

Lockheed Martin Corporation does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PB ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $9.41 in 2014 to an estimated $13.44 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.53% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Lockheed Martin Corporation revealed the company was trading above its Graham Number of $0. The company pays a dividend of $7.46 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 19.56, which was below the industry average of 47.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-96.39.

Lockheed Martin Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$96.39
Graham Number $0.00
PEmg 19.56
Current Ratio 1.11
PB Ratio 75.23
Current Dividend $7.46
Dividend Yield 2.84%
Number of Consecutive Years of Dividend Growth 15

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $16,859,000,000
Total Current Liabilities $15,204,000,000
Long-Term Debt $13,486,000,000
Total Assets $45,495,000,000
Intangible Assets $14,358,000,000
Total Liabilities $44,493,000,000
Shares Outstanding (Diluted Average) 286,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $17.50
Dec2017 $6.89
Dec2016 $17.49
Dec2015 $11.46
Dec2014 $11.21
Dec2013 $9.13
Dec2012 $8.36
Dec2011 $7.81
Dec2010 $7.81
Dec2009 $7.64
Dec2008 $7.86
Dec2007 $7.10
Dec2006 $5.80
Dec2005 $4.10
Dec2004 $2.83
Dec2003 $2.34
Dec2002 $1.11
Dec2001 -$2.45
Dec2000 -$1.29
Dec1999 $0.99
Dec1998 $2.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $13.44
Dec2017 $11.36
Dec2016 $12.90
Dec2015 $10.27
Dec2014 $9.41
Dec2013 $8.39
Dec2012 $7.97
Dec2011 $7.74
Dec2010 $7.55
Dec2009 $7.11
Dec2008 $6.41
Dec2007 $5.27
Dec2006 $3.98
Dec2005 $2.57
Dec2004 $1.38
Dec2003 $0.48
Dec2002 -$0.23

Recommended Reading:

Other ModernGraham posts about the company

Lockheed Martin Corp Valuation – February 2018 $LMT
Lockheed Martin Corporation Valuation – June 2016 $LMT
34 Companies in the Spotlight This Week – 2/7/15
Lockheed Martin Corporation Annual Valuation – 2015 $LMT
14 Companies in the Spotlight This Week – 1/25/14

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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