Not Much Flash in Lockheed Martin Earnings

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When Lockheed Martin Corp. (NYSE: LMT) reported fourth-quarter and full-year 2018 results before markets opened Tuesday morning, the world’s largest defense company posted diluted earnings per share (EPS) from continuing operations of $2.39 on revenues of $14.4 billion for the quarter. In the same period a year ago, the company reported a net loss of $85 per share on revenues of $13.8 billion. The net loss last year was the primarily due to the tax reform bill and was a non-cash loss. The latest quarterly results also compare to the consensus estimates for EPS of $4.40 and $13.75 billion in revenues.

For the full year, the company posted EPS of $17.59 on revenues of $53.8 billion, compared with year-ago EPS of $6.50 and revenues of $50 billion. Analysts were looking for EPS of $17.59 and revenues of $53.11 billion.

Cash flow from operations totaled $2.2 billion in the quarter, up from $1.5 billion in the fourth quarter of 2017. For the year, cash flow from operations totaled $3.1 billion after annual pension contributions of $5 billion. In 2017, cash flow totaled $6.5 billion with no pension contributions.

CEO Marillyn Hewitt commented:

As we look ahead to 2019, we remain focused on performing with excellence for customers, and our record backlog and differentiating portfolio have us well-positioned for continued growth and long-term value creation for shareholders.

Lockheed’s outlook for 2019 calls for revenues in the range of $55.75 to $57.25 billion and diluted EPS of $19.15 to $19.45. Analysts had forecast EPS of $19.55 and revenues of $56.23 billion. The company forecasts cash flow from operations of at least $7.4 billion and a pension benefit of about $1.5 billion.

The company repurchased 4.7 million shares of its stock, valued at $1.8 billion, during 2018 and paid dividends totaling $2.2 billion.

Investors’ reaction to the report was positive if not enthusiastic. Quarterly earnings were only a penny short and full-year EPS came in as expected. Revenues beat expectations on both measures, but Lockheed’s EPS outlook was light, never a good signal to investors.

The somewhat mixed results have pushed the stock up about 1.5% in the late morning to $292.30, in a 52-week range of $241.18 to $363.00. The consensus 12-month price target on the stock is $343.37.