Lockheed Martin (LMT) shares fell in the pre-market session on Tuesday, January 28th, as the company took a massive hit on charges relating to classified programs in the Fiscal fourth quarter.
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Under-fire LMT booked a loss of $1.7 billion from classified programs in the quarter, severely impacting net profits to the tune of $5.45 after tax. As a result, net earnings in the fourth quarter of 2024 were $527 million, or $2.22 per share, compared to $1.9 billion, or $7.58 per share, in the fourth quarter of 2023.
LMT Still Upbeat on Sales Despite DOGE Risk
Nevertheless, LMT hailed a 5% rise in sales over the year to $71 billion and a “record” year-end order backlog of $176 billion as demonstrating the enduring demand for its products.
It comes as the company is one of several in the defense sector to potentially face cutbacks led by the Trump administration’s new Department of Government Efficiency (DOGE), whose leadership seems at odds with the expansion of the mammoth F-35 fighter jet program.
Elon Musk, who has been charged to lead the department, criticized Lockheed’s flagship. In a post on X, he said that “some idiots are still building manned fighter jets like the F-35.”
Lockheed President and CEO Jim Taiclet appeared to address the elephant in the room in the earnings release.
“We are fully committed to developing a combined air power solution set that integrates new 6th generation with current 5th generation and 4th generation aircraft using wingman drones, AI, advanced sensors in space and in the air, and 5G-level, cyber-hardened data links,” he said.
Analysts at Baird recently downgraded their LMT price target on DOGE risks, citing the 35% revenue mix to the F-35, which they think is likely to be scrutinized given significant cost overruns and the desire to accelerate adoption of unmanned aircraft over crewed aircraft. Indeed, DOGE risks seem to have been a factor in a number of recent price target downgrades for LMT.
For Fiscal 2025, LMT guided sales between $73.8 billion and $74.8 billion, with the midpoint slightly above the Wall Street consensus. Operating profit margins are expected to come in a bit below 11%, down factionally on 2024.
Is Lockheed Martin Stock a Buy?
Wall Street’s consensus rating for LMT stock is a Moderate Buy, based on six Buys and eight Holds. The average analyst price target of $546.57 implies upside potential of about 8% from current levels.
