Analyst optimism clashes with market realities as Lockheed shares dip.
- Lockheed Martin upgraded to ‘Buy’ with a price target of $704 per share.
- Analyst Robert Spingarn believes consensus estimates for F-35 growth are too low.
- F-35 sales, which account for 25% of Lockheed’s revenue, are expected to grow at 4% annually.
- Despite the upgrade, Lockheed shares fell 0.6% in premarket trading.
- Lockheed shares have risen 25% this year, nearing record highs.
In a surprising turn of events, Lockheed Martin’s stock, despite receiving a significant upgrade from Wall Street, is experiencing a decline. Analyst Robert Spingarn from Melius Research has upgraded Lockheed’s shares from ‘Hold’ to ‘Buy’, setting a new price target of $704 per share, which is notably higher than the previous target of $531. This optimistic outlook is based on the belief that current consensus estimates do not adequately reflect the growth potential of the F-35 fighter jet, particularly as its installed base is projected to grow by 48% by the end of 2026. nnThe F-35, a key product in Lockheed’s aeronautics division, has recently seen a resurgence in sales after a decline in 2022 and 2023. Spingarn anticipates a 4% annual growth rate in F-35 sales over the coming years, which is significantly higher than the 1% to 2% growth rate suggested by current consensus estimates. This increase in sales is crucial, as F-35 jets contribute approximately 25% to Lockheed’s total revenue. nnLooking ahead, Spingarn forecasts that Lockheed’s sales will reach $80 billion by 2026, surpassing the consensus forecast of $77 billion. He also predicts earnings per share and free cash flow of about $33 and $7.3 billion, respectively, compared to the Street’s estimates of $30 and $6.3 billion. nnHowever, despite this bullish analysis, Lockheed shares were down about 0.6% in premarket trading, priced at $564.95. This decline comes as broader market indices, including the S&P 500 and Dow Jones Industrial Average, also faced slight drops. One reason for the muted response to the upgrade could be the stock’s impressive 25% rise this year, bringing it close to record highs. Currently, 44% of analysts covering Lockheed rate it as a ‘Buy’, which is below the average of 55% for S&P 500 stocks, although this rating has improved from just 13% at the start of 2024. The average price target for Lockheed shares now stands at approximately $546.
Factuality Level: 8
Factuality Justification: The article provides accurate and objective information about the upgrade of Lockheed Martin’s shares by Robert Spingarn of Melius Research, the reasons behind it, and its potential impact on the company’s sales and earnings. It also includes relevant data such as price targets and analyst ratings. However, it lacks a clear conclusion or summary, and there is some repetition in the text.
Noise Level: 3
Noise Justification: The article provides relevant information on an upgrade of Lockheed Martin’s shares by Melius Research and the potential growth in F-35 sales. However, it lacks a comprehensive analysis of long-term trends or possibilities, accountability, and actionable insights for readers.
Public Companies: Lockheed Martin (LMT)
Key People: Robert Spingarn (Analyst at Melius Research)
Financial Relevance: Yes
Financial Markets Impacted: Lockheed Martin’s stock and the defense industry
Financial Rating Justification: The article discusses Wall Street upgrades, analyst calls, and their impact on Lockheed Martin’s stock, which is a financial topic. It also mentions the potential impact on the defense industry due to the upgrade.
Presence Of Extreme Event: No
Nature Of Extreme Event: Other
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: No extreme event mentioned in the article.
Move Size: No market move size mentioned.
Sector: Defense
Direction: Up
Magnitude: Large
Affected Instruments: Stocks
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