Lockheed Martin (NYSE: LMT) Sets Its Sights On Fresh Highs

After bouncing off a decent support level in November of last year, shares of Lockheed Martin (NYSE: LMT) look like they’re ready to start testing the upper levels of resistance in the coming sessions. The aerospace and defense company hit those highs this time two years ago, right before the COVID pandemic hit. But unlike tech and e-commerce stocks, they’ve struggled to undo the damage since and have instead traded in a fairly confined range. 

But a combination of geo-political factors and a solid earnings report card are providing two tailwinds that should give shares enough momentum to seriously test their recent highs if not break through them completely. To start with the latter, Lockheed released their Q4 earnings on Wednesday morning, which were solid across the board. Topline revenue was up 4% year on year and ahead of what analysts had been expecting. So too was the company’s bottomline earnings per share print.

Outperforming The Market

The stock is currently up more than 5% since the release, not bad considering the major equity indices have been dicing with multi-month lows all this week. It looks like Wall Street was impressed by revenue growth in many of the company’s key business units, such as aeronautics, missiles and fire control, and rotary and mission systems. Growth in these units helped offset a decline in space sales. 

Looking ahead, Lockheed’s full-year forecast for 2022 was broadly in line with the consensus which should give investors a boost of confidence in light of how many companies are rapidly scaling back their previous forecasted figures. Investors have also been enjoying a consistent bid in recent weeks as tensions have soared between Russia and NATO over Ukraine. It’s a well known fact that defense companies tend to outperform all others during the initial phase of military confrontations, and this has surely played a role in Lockheed’s stock rallying 20% since early December while the S&P 500 index is down close to 10% over the same period.  

All in all, it’s probably not a bad time to own Lockheed stock. In addition to these more recent tailwinds supporting the bid, Lockheed stands to benefit from US government spending on defense, which is at its highest ever levels and set to keep rising. Starting in 2023, Lockheed will be delivering more than 150 fighter jets to the US military every year, with no defined end date. This kind of reliability in revenue is expected to drive even greater dividend increases. This dividend, along with a strong share repurchase program are two key factors that should also be of interest to investors on the sideline who are considering opening a position. Indeed, the company is expected to return the guts of $9 billion to shareholders this year alone through both those avenues, and it holds an impressive record of having increased its dividend for twenty straight years. 

Impressive Dividend History 

As CEO James Taiclet said at the time of the company’s Q3 release "we are going to dynamically allocate capital to the highest return opportunities, prioritizing investments that lead to growing free cash flow per share. That's our new metric.” There’s not really much more you want to hear as a shareholder, and the stock’s strong performance in recent weeks is testament to the high regard in which Wall Street holds Lockheed shares right now. 

A price-to-earnings ratio of 17 is an attractively low figure to be looking at in the context of the high double and even triple P/E ratios seen in the tech space, which understandably are hurting all the more for it right now. Looking ahead to the coming sessions, if the stock can make a clean break of $400, it will be in a very strong position to start trying for its all time high of $440. Looking at the weekly or monthly chart, we can see a long term pennant forming, with this current rally on the verge of cracking through it. In a sea of red equities right now, Lockheed is one of the few shining greens.