Lockheed Martin Earnings Were Solid. Why the Stock Is Falling.

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Updated July 26, 2021 10:40 americium ET / Original July 26, 2021 9:20 americium ET

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Shares of Lockheed Martin are up 7.3% twelvemonth to date.

Luca Barioulet/AFP via Getty Images

Defense elephantine Lockheed Martin cruised past Wall Street second-quarter net expectations—with 1 caveat—and raised its full-year net guidance. Still, shares tumbled Monday.

For the quarter, Lockheed (ticker: LMT) reported $6.52 successful per-share net from $17 cardinal successful sales, successful enactment with Wall Street’s expectations for $6.53 successful per-share net from $17 cardinal successful sales. But Lockheed recorded a $0.61 per-share complaint related to “performance issues experienced connected a classified program” astatine its jet-making franchise Aeronautics. These kinds of expenses, labeled arsenic a peculiar complaint by Lockheed, typically don’t repeat.

Removing that 61-cent complaint makes Lockheed’s 4th look solid. What’s more, the institution raised its full-year guidance. Lockheed present expects to gain astir $26.85 for full-year 2021, up from the guidance of $26.55 fixed successful April.

Lockheed has raised full-year net guidance erstwhile reporting some its first- and second-quarter numbers.

“Lockheed’s execution implicit caller years has been truthful bully that we can’t adjacent retrieve erstwhile the past clip was that we saw the institution instrumentality an operating charge,” wrote Vertical Research Partners expert Rob Stallard successful a Monday report. “We would ideate that investors had been expecting the accustomed ‘beat and raise’ show for 2Q, and truthful today’s inline effect with nary alteration to the operating guidance is apt to beryllium a disappointment.”

That looks similar a bully call. Lockheed banal was down much than 3% successful aboriginal trading. The S&P 500 and Dow Jones Industrial Average were astir flat. But Stallard recommends buying the dip: “Should the banal sell-off heavily, past this could beryllium a bully introduction point.” He rates shares Buy and has a $443 terms people for the stock.

“In my archetypal twelvemonth starring our company, I’m arrogant of the bonzer resoluteness demonstrated by our 114,000 squad members to emergence supra the challenges of the pandemic successful enactment of our customers, our federation and our allies.” said James Taiclet, Lockheed Martin chairman, president and CEO. “Our teams proceed to present connected cardinal level programs portion besides advancing technologies captious for 21st period deterrence and technological discovery.”

Taiclet seems pleased. Sales grew successful each of the company’s segments: aeronautics, missiles, helicopters, and abstraction systems. Total income grew astir 5% twelvemonth implicit year.

Lockheed absorption scheduled a conference call for analysts and investors astatine 11 a.m. eastern. Investors volition privation to perceive astir the defence fund and its interaction connected Lockheed income arsenic good arsenic the outlook for nett margins.

Year to date, Lockheed banal is up 7.3%, trailing down the comparable 17.5% summation of the S&P 500. Lockheed stock, however, trades for 13.6 times estimated 2022 earnings. The S&P 500 trades for 20.5 times estimated 2022 earnings.

Write to Al Root astatine allen.root@dowjones.com

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