Is Lockheed Martin a Safe Defensive Dividend Stock to Buy Right Now? | LMT Stock Analysis

Parkev examines Lockheed Martin's recent performance, highlighting a substantial $64 billion increase in its backlog, which now totals $230 billion. Parkev notes that the company’s management strategically increased manufacturing capacity ahead of time, allowing them to capitalize on rising demand from geopolitical tensions more quickly than anticipated. Revenue grew by 11% in the most recent quarter, reaching over $20 billion, driven by defense budget increases across the U.S., Europe, and Asia.

Parkev observes that while Lockheed Martin's operating profit margin of 11.8% is modest compared to other industries, it is a characteristic of the defense sector where manufacturing effectiveness is a primary challenge. However, Parkev emphasizes that the company boasts a 22% return on invested capital (ROIC), which is more than double its weighted average cost of capital and leads its industry peers. This indicates that Lockheed Martin is effectively generating shareholder value from its investments.

Regarding valuation, Parkev points out that the stock trades at a forward P/E of 16.6, which is near historical lows despite the favorable market environment. Parkev's proprietary discounted cash flow model suggests a fair value of $660 per share, offering approximately 21% upside from the current price of $544. Consequently, Parkev reiterates a 'buy' rating and upgrades the conviction level to medium, citing performance improvements and favorable valuation.