I previously covered Lockheed Martin (NYSE:LMT) on December 2017 before Q4 2017 earnings , and after facing a sharp drop-off following a good Q1 2018 earnings report, I think that the stock remains a great buy and undervalued in the long run. Given the stable revenue stream that defense contractors enjoy, the geopolitical tension in the Middle East only serves to grow both domestic and international sales across Lockheed’s product lineup.
After a little less than a year and a half under the Trump administration, not much has changed on the outlook for the defense sector. Lockheed Martin maintains strong cash flow and maintains long term growth potential across the different sectors, driven by sales of F-35 and international sales to US allies. Aeronautics sales make up roughly 40% of revenue; much of the growth in this sector is attributed to increased volume since production has begun. Other sales include modernization programs for older aircraft and maintenance. Particularly with increased tensions in the Middle East and North Korea, missile defense system sales are projected to keep growing. The year-on-year increase over Q1 last quarter was 8%; I expect this trend to continue to hold steady or increase.
