Lockheed Martin (LMT) PT Raised to $487 at Deutsche Bank
Deutsche Bank analyst Scott Deuschle raised the price target on Lockheed Martin (NYSE: LMT) to $487.00 (from $467.00) while maintaining a Hold rating.
The analyst comments "LMT reported solid 1Q24 results, with revenue 8% above Street, segment EBIT 5% above, EPS 11% above, and FCF 9% above. While street mis-modeling of the extra week certainly played a part in this quarter's outperformance vs. sell-side estimates, there were also pockets of fundamental outperformance, like on MFC top-line growth (+16% normalized), RMS growth (+8% normalized), or Space margins (9.9%, +70bps vs. Street). Based on this result, there looks to be clear upside on full-year sales, where guidance assumes ~flattish sequential volume at both MFC and Space from here—something which seems quite unlikely given budget trends in both domains over the last two years. Another positive was the absence of any changes to the TR3 delivery timeframe, as well as commentary during our callback on TR3 hardware deliveries that sounded incrementally more positive. Trends in net EACs and overall company margins were disappointing, however, with LMT booking just $195m of positive EACs this quarter vs. $415m in the PYQ (-53% y/y). Excluding the AIM-260 charge at MFC, net EACs would've been $295m, or down 29% y/y. This sets up a somewhat steep EAC ramp in 2H to hit the margin guide. We think it's possible, particularly as MFC shipments continue to rise—but a 2H margin improvement story remains tricky in an environment of relatively sticky inflation. Disclosure on the call and 10Q regarding up to $1.3b of total charges on AIM-260 also points to persistent pressure to margins beyond 2023, as well as FCF as the cash costs ramp up. Overall, then, the quarter again emphasizes the upside potential to Street revenue forecasts, but equally points to continued challenges on margins. And while the TR3 timeline was reiterated, it's not done until it's done. So for now, we're sticking with our Hold rating given some lingering risks and our preference for other defense names that we think offer more upside to estimates and still cheaper valuations (GD and LHX)."