Lockheed Martin Corporation (LMT): A Must Buy

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The Country Caller takes a look at the defense contractor’s recent financial quarter; its strengths and weaknesses

Having received most of its business from the Department of Defense (DoD) and US federal government agencies, Lockheed Martin Corporation (NYSE:LMT) reported total net sales of $11,551 million in third quarter of fiscal 2016 (3QFY16) compared to $10,060 million in 3QFY15.

In addition, sales in the first nine months came in at $33,496 million compared to $29,016 million reported in the same period last year. The company also managed to increase its gross profit from $1,097 million to $1,384 million year-over-year (YoY).

For the same quarter, the company’s net earnings stood at $2,395 million, increasing from $865 million in 3QFY15. As for the last nine months ended in 2016, Lockheed recorded a jump in net earnings from $2,672 in 2015 to $4,314. However, it reported a decrease in total assets, which stood at $48,739 million in 3QFY16, compared to $49,304 million in the same period last year.

Lockheed’s leverage ratio for the third quarter (3Q) came in at 6.158:1 compared to 2.990:1 YoY; this goes on to indicate that the company is making the use of debt to finance. Analysts related to the industry advise cautious stance over further investments in the heavy industry player.

It is close to impossible for a single method to gauge the company’s performance. Having said that, The Country Caller—after viewing Lockheed’s financial performance—believes that the company is profitable and has shown growth in recent quarters. However, the only catch is that it needs to work on its financial leverage. It would be in the best interest, if the defense contractor raises less debt and uses more equity for a less risk adverse investment.

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