Glide Path. Lockheed Martin Flying Low. Time To Go?

Graphic, LMT, SW
Very few companies can build this value-added stuff.

 

INVESTING

IS GUARANTEED A NONSTOP IN-YOUR-FACE CHALLENGE.  AND THEN IT SHAVES AWAY PART OF YOUR MONEY.  THAT CAN  BE HARD RIGHT?  YOU WORK ALL THE TOOLS TO SLICES AND DICES THE PRICE LIKE AN AUTOPSY.  WE EVEN HAVE HEMISPHERIC SCHOOLS OF ANALYSIS; FUNDAMENTAL AND TECHNICAL.  BUT OOPS, OFTEN THEY DO NOT AGREE.  NOW WE’RE TALKIN’ LMT.

 

LOCKHEED MARTIN IS A WINNER WITH A BULLET-PROOF BALANCE SHEET.  LMT IS AS CRAMER SAYS A “PURE PLAY” ON DEFENSE, BUT NOT HIS FAV.  YET THEY GENERATE FREE CASH LIKE A PRINTING PRESS AND PENSION OBLIGATION?  FORGET ABOUT IT.  HANDLED.  THEY ARE STOCKPILING CASH AT THE RATE OF 2 BILLION A YEAR.  THEY ALSO THE SOLE BUILDER OF THE JOINT STRIKE FIGHTER, THE F-35, AND ALL IT’S VARIANTS.

 

 

airplane, F-35
Lockheed Martin F-35 Joint Strike Fighter. The single-seat stealth JSF comes in multiple variants: the F-35A, CTOL(conventional take-off and landing), the B, STOVL(short take-off vertical landing), the F-35C, the carrier variant for the Navy. The F-35C VTOL is all vertical. It including folding wingtips and larger tail and wing control surfaces.

 

 

 

But as a pure defense contractor Lockheed is prisoner to federal dysfunction, gridlock, and budget cutting.  Government half-measures such as the CR(continuing resolution) create disruption to LMT’s business.  Lockheed also–and has–can be drawn into the headlines by the president.  The result can be downward pricing pressure.

 

 

aircraft-1008284_1920
The famous A10 Thunderbolt. Air support for ground troops. The “Warthog” flies low and slow and can take a beating, while rolling out total hell on everything. Accept no substitute. None exists.

 

 

 

While under development the F-35 was intended as a replacement for the ultra-famous A10 Thunderbolt.  Wrong.  Ask people who know–there is no substitute for the “Warthog” or “Tank Killer.”

 

 

 -Technicals-

5-17-18.  Close.

graphic-charts-lmt-5-171.png
LMT of 5-17.  From bad to worse.  Following it’s savage plunge LMT has settled into a tight trading range.  Technicals suggest no bottom has been reached.

 

LMT’s price collapse began with the market-wide drop on February 19th.  As our market leaders recovered, LMT was curb-to-curb, until completely collapsing below both its’ SMAs, the 50 and 200.  The technicals tell us no bottom has been reached yet.  Now LMT seems pinned in a very tight trading range.  A breakout from this structure seems more likely to the downside.  We didn’t want to take this ride any lower.  We bolted Monday at $319.88, only to watch it recover a buck same day.

 

6-11-18.  Open.

LMT, 6-11, SELL
While Lockheed-Martin’s fundamentals are very strong, the chart is broken.  The two charts demonstrate the tight trading range LMT now inhabits.

 

 

 

-Fundamentals-

Earnings

Earnings growth rates:

 

NORTHROP GRUMMAN  28%y/y.

RAYTHEON                               14%y/y.

LOCKHEED MARTIN        49.4%y/y.

                    Q1, 2017 GAAP EPS $2.69. 

                    Q1, 2018 GAAP EPS $4.02.

 

LMT, earnings Q1,'17
Q1, 2017. GAAP EPS $2.69.

 

LMT, Q1,'18
Q1, 2018. GAAP EPS $4.02. This EPS post represents a 49.4% earnings growth rate.

 

 

 

Margins/Management Effectiveness

graphic-LMT, RTN, NOC, X
The margins companies post are direct evidence of management’s effectiveness.  Lockheed’s sky-high return on equity, 643, is a reflection of their higher use of leverage.

 

 

Valuation

Our brand new installment of STOCKjAW’s Money Chops shows how to calculate your own, accurate, P/E and Peg ratios.  Why?  All data streams display mistakes.  Don’t invest on bad valuation metrics.  Today we saw a trailing P/E of 39 for LMT.  based on the 6-12-18, pre-open share price of $319.30, and a trailing four quarter annual EPS of $14.05, the actual P/E is 22.  Check the facts.

 

 

Graphic, Valueation, LMT
Clearly the P/E ratios is a wash for these more pure play defense contractors. Peg ratios display the actual cost. That’s why we love Peg. LMT’s higher debt level creates a massive return on equity of 643, and a much lower cost to own. LMT wins our straight up valuation shootout.

 

 

STOCKjAW’s cost basis of $254.65 was too low to stay.  Violating an established cost basis is just begging for trouble.  Lockheed is a buy now if you hope to build a longer-term position.  Now that we’ve taken a profit, perhaps we’ll buy back in on the way down.

 

Thanks for reading.

AAA Stockjaw scooter

STOCKJAW.COM

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Additional resources:

Investopedia.com.  Seriously Wonderful.  Fact.
http://www.investopedia.com/
Charles Schwab.  In Our Opinion, the best broker going.
https://www.schwab.com/public/schwab/client_home
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