Lockheed Martin (NYSE:LMT)
Analysts at Credit Suisse gave Lockheed Martin (NYSE:LMT) an Underperform rating, citing the military contractor’s pricey stock price compared to its competitors. The bank has established a $375 price target on Lockheed Martin stock.
While the S&P 500 Stock Index fell 25% this year, Lockheed Martin stock rose 16%, closing at $411.06 on October 11th.
Credit Suisse said that Lockheed Martin (NYSE:LMT) was rethinking its manufacturing schedule for F-35 fighter planes for the United States military due to supply-chain constraints. To facilitate software and hardware changes without replacing a whole technological platform, the Defense Department is embracing the modular open systems strategy. The objective is cost reduction via increased contractor competition.
According to Credit Suisse analyst Scott Deuschle’s Oct. 11 study, “the change to modularity will limit the amount of control previously enjoyed by systems integrators,” which is the control that allows them to thrive in sustainment, modernization, and recompetes for their platforms. It may be argued that LMT is being disrupted due to the move toward modularity, which demands that the corporation give up some control over its platforms.
Lockheed Martin stock should be valued using multiples similar to its rivals, as suggested by Credit Suisse, unless there are signs that the company can effectively manage this transformation. Financial analysts believe that Lockheed would benefit from a reduction in the company’s book-to-bill ratio, an award for the Army’s next-generation helicopter, and a Republican majority in the House after the next elections.
Lockheed Martin stock price target of $375 price objective from Credit Suisse is in line with Northrop Grumman (NYSE:NOC), L3Harris (NYSE:LHX), and General Dynamics (NYSE:GD) targets, all of which yield 6% on expected adjusted free cash flow for 2024.
Based on the military contractor’s dividend yield, Seeking Alpha contributor Dhierin Bechai recommends buying Lockheed Martin stock. As a result of the optimistic forecast for military expenditure, contributor Deep Value Ideas also recommends buying Lockheed Martin stock.
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Credit Suisse begins coverage of the aerospace and military industries with a rating of Underperform for Lockheed Martin stock.
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Author Shariq Khan 
