Is Lockheed Martin a Promising Investment?

PHOTO CREDIT: Lockheed Martin

OVERVIEW

The Lockheed Martin Corporation is a defense company that designs, develops, manufactures, and sells defense hardware and software to the United States government, which later distributes it to ally countries around the world. They offer manned and unmanned aircraft, missiles and missile defense systems, helicopters and combat solutions, and cybersecurity solutions.

Why You Should?

  1. Lockheed Martin manufactures a wide range of products. From the C-130 aircraft, F-35, and the F-22 Raptor to helicopters and missile systems, the company has offerings for many defense needs. This will benefit the company’s current and future growth.
  2. Governments rely on Lockheed Martin for their defense needs. The company offers several fighter jets and aircraft as well as missile defense systems that are widely used in several conflicts all around the world. This reliance will benefit the company in the future as they will see strong demand for current and many future product offerings.
  3. The current political atmosphere will benefit the company. The Trump Administration has not skimped on defense spending as he signed a budget with one of the largest defense spending amounts. He has also sold several Lockheed Martin products to different countries in several deals. It is unlikely that a possible Biden Administration will reduce defense spending. This will benefit Lockheed Martin.
  4. The defense industry is a fairly safe industry to invest in due to government reliance and all-time high defense spendings which are likely to stay. Lockheed Martin has remained a safe investment as governments try their best (and have succeeded) to maintain high defense spendings. This safety will benefit the company in the future.
  5. Lockheed Martin has seen a rise in revenues and profits over the past couple of financial years due to strong demand for their products. This will benefit the company’s future growth and will help it build a stronger balance sheet. In the financial year of 2019, the company reported revenues of around 59.8 billion and profits of around 6.2 billion. Both of these metrics are higher than what the company reported in the financial year of 2018 when they reported revenues of around 53.8 billion and profits of around 5 billion.
PHOTO CREDIT: Yahoo Finance

Why You Should Not?

  1. Lockheed Martin faces competition from several other large defense firms like Northrop Grumman and Boeing. They sometimes offer competing products which puts the government in a tough place on who to award contracts too. This usually means that both companies get less money as the money is divided. This might hurt Lockheed Martin in the future.
  2. Lockheed Martin has been negatively impacted due to the COVID-19 Pandemic. Though they have reported strong quarterly results as their factories have stayed open, countries might spend less money on defense and more for pandemic-readiness in the years to come. A drop in production due to the pandemic also hurt the company in the short term. This will hurt the company in the short-medium term.

MY OPINION

In my opinion, I think that Lockheed Martin is a strong long term investment due to the high demand for all of its defense products due to high government spending and government reliance. A strong political background, its place in a safe industry, and its stronger balance sheet will benefit the company’s future growth. However, the COVID-19 Pandemic and competition might hurt the company in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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