Lockheed Martin reported Q3 earnings on Tuesday and promptly cratered 11%.
The Bad News
- Supply chain issues are having large impacts on the already kinda shaky F-35 program
- Revenue declined 3% YoY and 2023 guidance dropped to $66B, below 2023’s guidance
- Management is reassessing their five-year business plan as a result of these issues
The Good News
- LMT increased its share buyback authorization by $5B to a total authorization of $6B
This buyback is massive – they could, at current share price, buyback 6.6% of total shares outstanding. Now who says they will use this full authority? Take it from the horse’s mouth:
“With our stock trading at a level well below what we calculate as the Company’s intrinsic value, we have significantly increased our planned share buybacks, and I anticipate that we will repurchase up to $6 billion of our shares over the next 12, 18 months, if conditions warrant.” -James Taiclet, CEO
Keep in mind, he said this before the 11% selloff – tomorrow morning they will wake up and buy the hell out of this dip as I bet they already did today as conditions sure as hell warrant now.
What makes this all sweeter? LMT is a certified boomer company with the Institutional ownership to match at 74.92%. As a result, pulling 15-18M shares off the market over the next 12 months will have even more impact. A bonus? You get to pretend you’re a boomer for a couple months and get a sweet 3% divi if you go with shares.
The Spice
In Dec. 2020 LMT announced they entered into an agreement to purchase rocket engine and missile part supplier Aerojet Rocketdyne. The merger has been pushed back to Q1 of 2023 as the FTC and DoD review the merger for anti-trust concerns. Elizabeth Warren is the most notable opposition (Who is totally legitimately concerned about anti-trust and not shilling for her home-state LMT competitor Raytheon – the defense industry gets everyone eventually), but 13 other congressmembers have lobbied for the merger to be approved. I bet it will go through (With some minor concessions) as a similar merger between Orbital ATK and Northrop Grumman happened in 2018.
If this merger goes through, that could be another good mid term catalyst.
I’m in shares and LEAPS. Not financial advice
This article was written by u/Myers112
