Background
HQ: Bethesda, MD
Ticker: LMT
Headcount: 115,000
Mkt Cap: $126.34 billion
P/E: 22.13
Div Yield: 2.49%
Operating Margin: 9.29%
Price to Sales: 2.01
Price to Book: 10.62
Return on Assets: 8.99%
Total Cash: $2.43 billion
Total Debt: $11.4 billion
Stock Performance:
YTD: +36.04%
1Yr: +45.48%
5Yr: +55.51%
S&P Global Credit Rating: A-
Q3 2022 Earnings Review (reported October 18th)
Key Figures:
Net sales of $16.6 billion vs up 4% YOY
Net earnings of $1.8 billion vs $614 million in Q3 2021
Free cash flow $2.7 billion versus $1.6 billion in Q3 2021
Capital expenditures $405 million up 28% YOY
Backlog of $140 billion
In the quarter returned $2.1 billion of cash to shareholders
Increased its quarterly dividend by $0.20 per share
4 Divisions (Q3 figures)
Aeronautics
$7,089 billion up 8% YOY
Operating profit $759 million vs $714 million in Q3 2021
Operating Margin 10.7%
Missiles and Fire Control
$2,831 billion up 2% YOY
Operating profit $382 million vs $413 million in Q3 2021
Operating Margin 13.5%
Rotary and Mission Systems
$3,781 billion down 5% YOY
Operating profit $414 million vs $459 million in Q3 2021
Operating margin 10.9%
Space
$2,882 billion up 7% YOY
Operating profit $301 million vs $264 million Q3 2021
Operating Margin 10.4%
Backlog:
Aeronautics: $48,162 billion
Missiles and Fire Control: $28,077 billion
Rotary and Mission Systems: $35,026 billion
Space: $28,448 billion
1.3 Book to Build Ratio (ratio of orders received to units shipped out)
Earnings Call Notes
CEO Jim Taiclet discussed the firm's continued investment in key weapon systems such as the F-35, Javelin, and HIMARS.
They discussed a return to growth in 2024. The pandemic and supply chain impacts have hurt growth. The CEO expects the 2023 outlook to be very similar to 2022.
The company continues to invest in FY 2023, they plan to spend approximately $4 on CAPEX.
HIMARS has been a key weapon system for the Ukrainians. The U.S. looks to replenish our stocks. The CEO admitted to robust discussions with their supply chain partners about efforts to increase production. The run rate will be about 96 HIMARS produced a year. As the production ramps, there will be an opportunity to expand margins.
During the quarter, Switzerland took delivery of F-35s. The Swiss became the 15th country to take delivery of F-35s.
The CEO spoke about its “LM Ventures” arm which looks to make strategic investments into defense-related start-ups. $200 million was the original investment amount but recently valued at $400 million (100% return).
CFO discussed that Wall Street should look at Free cash flow per share as the metric to judge the health of the business.
The topic of “inflation” was mentioned a few times throughout the call. The CEO admitted to seeing inflation on the labor and the supply chain front. 60% of the business is fixed price but inflation has affected the new bids/proposals.
Lastly, the CEO talked about low single digits growth in 2024. Upside opportunities with missiles/HIMARS. The CEO revealed that defense spending is expected to be higher than the budget proposal.