Lockheed Martin Corp.’s LMT steady inflow of orders for its diverse defense products is likely to boost its revenues. The company also gains from its presence in the international defense market and solid backlog.

However, this Zacks Rank #3 (Hold) company faces risks like the shortage of skilled labor and sanctions imposed by China, which act as a headwind.

Tailwinds Favoring LMT
 

In the third quarter of 2024, Lockheed kept up with its tradition of securing several significant contracts from the Pentagon and other American allies. These include a $520 million contract to begin production tasks of the Viper Shield electronic warfare suite for the F-16 Block 70/72 aircraft. Such contracts culminate into a solid backlog count, which boosts LMT’s revenue generation prospects.

Lockheed Martin's products not only have an impressive domestic market presence but also gain international recognition. International customers have shown a great deal of interest in its Patriot Advanced Capability-3 (PAC-3) missiles and Terminal High Altitude Area Defense system, with 15 nations choosing the PAC-3 Cost Reduction Initiative and PAC-3 Missile Segment Enhancement to enhance their missile defense capabilities.

Lockheed’s total backlog came in at a solid $165.69 billion as of Sept. 29, 2024. Such a consistent level of contract flows and subsequent backlog growth bolster its long-term revenue prospects. The company expects to recognize approximately 36% of its backlog over the next 12 months and approximately 59% over the next 24 months.

Headwinds Faced by LMT
 

Industry participants like Lockheed continue to be at risk from the labor crisis, particularly with regard to skilled workers. These labor shortages may make it difficult for manufacturing companies like Lockheed to deliver finished products on schedule, which might affect its operating performance going forward.

In 2023, the China Ministry of Commerce declared that Lockheed had been placed on its list of "unreliable entities" in relation to certain foreign military sales made by the U.S. government to Taiwan involving LMT’s products and services. In this regard, China declared it would impose certain sanctions against Lockheed. If China imposes further sanctions on LMT, the company's business may suffer.

LMT Stock Price Movement
 

In the past six months, shares of LMT have risen 16% compared with the industry’s growth of 1.7%.

Image Source: Zacks Investment Research

Stocks to Consider
 

Some better-ranked stocks from the same sector are Curtiss-Wright Corp. CW, HEICO Corporation HEI and BAE Systems BAESY, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Curtiss-Wright delivered an average earnings surprise of 12.78% in the last four quarters. The Zacks Consensus Estimate for CW’s total revenues for 2024 stands at $3.08 billion, which indicates growth of 8.1% from the 2023 reported figure.

HEICO’s long-term earnings growth rate is 19.4%. The Zacks Consensus Estimate for HEI’s total revenues for fiscal 2024 stands at $3.89 billion, which calls for year-over-year growth of 31.1%.

BAE Systems’ long-term earnings growth rate is 12.4%. The Zacks Consensus Estimate for BAESY’s 2024 sales is pegged at $36.22 billion, which implies an improvement of 37.7% from the 2023 reported sales figure.

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Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

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