Wall Street Will Be All Ears as This Portfolio Name Shares Outlook

*Lockheed will report its June quarter earnings tomorrow.

*While Lockheed has racked up many big program wins, we’ll be focusing on its F-35 outlook

*F-35 deliveries have started up again, but what is said about 2025 deliveries could drive EPS expectations and stock price targets higher

Our shares of Lockheed Martin LMT have made a considerable move since mid-February, quietly climbing some 14%. Program win after program win have reflected geopolitical tensions and NATO budget commitments have been some of the drivers behind that climb. The other larger catalyst many have been waiting for has been the resumption of F-35 Joint Strike Fighter deliveries, which have been plagued by upgrade issues.

Ahead of Lockheed reporting its June quarter results on Tuesday morning, for which the market expects EPS of $6.46 on revenue of $17 billion, the company delivered the first two F-35As loaded with a “truncated,” or partial, version of the Technology Refresh 3 (TR3) upgrade software. This version, while adequate for training per U.S. Air Force officials, isn’t up to snuff when it comes to flying combat missions. That’s not expected until 2025.

Not great news, but here is something better:

The F-35 program is taking a “phased approach” — aircraft with initial training capability will be delivered in July and August, and jets with a “robust combat training capability” will start to be delivered by the end of August.

Reports indicate there are “dozens” of nearly completed and parked F-35s, which we take to mean that we will see a period of ramping deliveries before Lockheed hits the sweet spot. This likely means the company’s outlook for the September quarter will be positively impacted with the December one even more so. That fits what we’ve been thinking, but we will be very interested in comments from Lockheed about 2025.

Current consensus EPS expectations have Lockheed delivering $27.96 compared to $26.26 this year. Should the F-35 delivery schedule show the need for that EPS consensus to move higher, it could result in our having to revisit our LMT price target of $520. If that’s the case, based on the Wall Street consensus price target of $492, we are probably going to see others do the same. While we aren’t the highest price target (that goes to Susquehanna and Seaport Global with their $540 to $550 targets), there are a number of price targets clustered in the $470 to $485 range.

We would probably need to see upside to $560 to $565 from current levels to warrant revisiting our two rating, but that’s going to hinge on what we hear about F-35s and 2025 on the company’s earnings call that kicks off at 11 a.m. ET on Tuesday, July 23. Conversely, if we have a "buy the rumor, sell the news" event tomorrow, which we think is rather unlikely, LMT shares have several layers of support between $445 to $465.

More Pro Portfolio:

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