fbpx

Supply Chain Issues Hurt Lockheed Martin (LMT)

Stocks closed mixed on Thursday as investors ponder better-than-expected inflation data. Despite that, the Fed is not ruling out a third consecutive 0.75% rate hike in September.

Overall, S&P500 declined 0.1% to 4,207, while NASDAQ declined 0.6% to 12,780.

In other news, Lockheed Martin (LMT) has been negatively affected by higher production costs. According to David Sharek,

LMT is one of the only stocks we own that has been badly hurt by supply chain issues. They just can’t complete the aircraft to deliver, and that crushed profits last qtr.

Tweet of the Day

Chart of the Day

Our chart of the day is the one-year chart of LMT as of July 30, 2022, when the stock was at $414.

LMT is one of the largest defense contractors in the world. The company was founded as Lockheed in 1926, and merged with Martin Marietta in 1995 to form Lockheed Martin. Lockheed was originally an aircraft company, that went on to produce the P-38J Lightning fighter aircraft which was widely used in World War II. On other hand, Martin Marietta was founded in 1961 and built the original intercontinental ballistic missile (ICMB).

Higher production costs and parts shortages hurt LMT sales profits last qtr, but the company might get a $30 billion contract for F-35s from the US later this year. Management is trying to deliver 156 aircraft per year, but COVID supply chain impacts will likely lower that figure to 147 to 153 for the next two years. In the long-term, the US Defense Department could purchase several hundred F-35s and that contract could be up to $30 billion (Source: Bloomberg). LMT is also seeing more International contracts for the F-35 and increased interest in the F-16. So profit estimates declined this qtr, and the stock has been rather weak as well.

LMT is part of the Conservative Growth Portfolio. David Sharek’s Fair Value P/E remains at 18. The stock is around its 2022 Fair Value.

Not a member? Sign up here for $25 a month.