We're Adding Shares and Upping Our Price Target on This Holding Amid Record Backlog

Symbol	Transaction Type	# Shares Traded	Recent Price $	Shares Owned After Trade	% Portfolio
LMT	Buy	30	$578	250	3.0%

After you receive this alert, we will buy 30 shares of Lockheed Martin LMT at or near $578. Following the trade, the Portfolio will own 250 LMT shares, roughly 3.0% of the Portfolio.

*Record backlog and visibility leads us to boost our Lockheed Martin price target to $650 from $625

*The latest dividend increase and upped buyback program bring share support, prompting our upgrade to a One rating as we add more shares to the Portfolio

*Lockheed intends to share its multi-year delivery schedule in January, shedding light on how conservative its guidance could be.

Following quarterly results from Lockheed Martin on Tuesday, which we described in the day's Daily Rundown video as being just fine even though it lacked details of its multi-year outlook, we are boosting our price target to $650 from $625.

This reflects the continued ramp in F35 deliveries, which hit 48 in the September quarter and should ramp higher from here over the coming quarters. Also giving us comfort in our price target increase is the record multi-year backlog level of more than $165 billion, which equates to more than 9.5 quarters of revenue at the September 2024 quarter level. This suggests low to mid-single-digit growth through 2027, and we like that degree of visibility.

Two other items that are helping frame our decision are the 5% increase in the company’s quarterly dividend to $3.30 per share and the $3 billion increase in Lockheed’s existing share repurchase program. After repurchasing 1.5 million shares during the quarter at an average price near $566, the program boost brings its total authorization to $10.3 billion. With LMT shares closing last night near $577, we would not be surprised to learn management was taking advantage of what we would describe as an overreaction to the September quarter earnings report. The company’s revenue came up short relative to market expectations due to revenue recognition with a particular lot of F35s, which is largely a matter of timing.

Other Wall Street Price Target Adjustments

We are seeing other price target movements this morning for the shares, including RBC cutting its target to $665 from $675 and Susquehanna reducing its target to $695 from the Wall Street high of $705, while Bank of America ups its target to $685 from $635. BoA’s increase reflects what it is calling conservative multi-year guidance in the low- to mid-single-digit range. The degree to which BofA’s thinking is correct will become clear when Lockheed finally shares its updated multi-year delivery schedule, something it intends to do in January. This means waiting a bit longer, but as you saw above, we have enough to warrant lifting our price target.

Double-Digit Upside and Support Lead Us to Upgrade

That action paired with the post-earnings sell-off offers upside of more than 12% from current levels while the buyback program offers downside cushion. The increased dividend puts the current dividend yield at almost 2.3%, well above the S&P 500’s dividend yield near 1.2%.

This combination is leading us to not only upgrade LMT shares to a One rating but to pick up some additional shares for the Portfolio. We recognize the shares are likely to take a few days to settle out following the earnings report and price target adjustments, but it’s not often we see such a sharp move lower in a company with such visibility and ramping production.

(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to click on Closed Trade Gain/Loss and toggle the chart to sort by Purchase Date.)

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At the time of publication, TheStreet Pro Portfolio was long LMT.