LMT - Lockheed Martin rated Underperform as Credit Suisse starts coverage of aerospace defense
Lockheed Martin ( NYSE: LMT ) was rated Underperform by analysts at Credit Suisse who said the defense contractor’s stock is expensive compared with peers. The bank set a price target of $375 a share.
Lockheed this year gained 16% to close at $411.06 on Oct. 11, compared with a 25% decline for the S&P 500 Stock Index ( SP500 ).
Credit Suisse said Lockheed is undergoing financial and strategic transitions that include a revision to its production of F-35 combat jets for the U.S. military amid supply-chain contraints. The Defense Department also is adopting what it calls the modular open systems approach that allows for software and hardware upgrades without replacing every part of a technology platform. The goal is to cut costs and boost competition among contractors.
“The transition to modularity will reduce the level of control historically enjoyed by systems integrators—control that allowed them to excel in sustainment, modernization and recompetes for their platforms,” Scott Deuschle, analyst at Credit Suisse, said in the Oct. 11 report. “The shift to modularity, then, is arguably forcing LMT to disrupt itself by giving up a measure of platform control.”
Until there are indications that Lockheed can successfully manage this transition, its stock should be valued using multiples that are like its peers, according to Credit Suisse. An improvement in Lockheed’s book-to-bill ratio, an award for the Army’s next-generation helicopter and a Republican majority in the House of Representatives after next month’s elections would be positive for the company, the bank said.
Credit Suisse’s price target of $375 a share for Lockheed is based on a 6% yield on estimated adjusted free cash flow for 2024, in line with defense peers Northrop Grumman ( NYSE: NOC ), L3Harris ( NYSE: LHX ) and General Dynamics ( NYSE: GD ).
Seeking Alpha contributor Dhierin Bechai rates Lockheed Martin ( LMT ) as a Buy on the defense contractor's dividend yield . Contributor Deep Value Ideas also has a Buy rating on Lockheed Martin ( LMT ) based on the outlook for defense spending .
| Credit Suisse - stock ratings for aerospace & defense, Oct. 11 |
| Defense |
| BWXT Technologies ( BWXT ) |
| Outperform |
| General Dynamics ( GD ) |
| Neutral |
| Huntington Ingalls ( HII ) |
| Neutral |
| L3Harris ( LHX ) |
| Outperform |
| Lockheed Martin ( LMT ) |
| Undeperform |
| Northrop Grumman ( NOC ) |
| Outperform |
| Commercial Aerospace |
| Boeing ( NYSE: BA ) |
| Underperform |
| Heico ( HEI ) |
| Outperform |
| Raytheon Technologies ( RTX ) |
| Neutral |
| TransDigm ( TDG ) |
| Outperform |
| Space |
| BlackSky ( BKSY ) |
| Outperform |
| Mynaric ( MYNA ) |
| Outperform |
| Rocket Lab ( RKLB ) |
| Underperform |
| Spire Global ( SPIR ) |
| Neutral |
| Virgin Orbit ( VORB ) |
| Underperform |
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Lockheed Martin rated Underperform as Credit Suisse starts coverage of aerospace, defense