In a concerted effort to return more value to its shareholders, the board of directors of Lockheed Martin Corporation (LMT) has authorized an increase to the amount available under the share repurchase program of up to $1 billion.
The new authorization adds to the current share repurchase program initiated in October 2010. The company, in the second quarter of 2011, repurchased 13 million shares for a total of $1 billion.
Earlier, Lockheed reported earnings per share of $2.14 in the second quarter of 2011 comfortably surpassing the year-ago results and the Zacks Consensus. Emboldened by the strong performance, the company raised the 2011 earnings expectation to a range of $7.35 to $7.55 per share from the previous band of $6.95 to $7.25.
At the end of second quarter 2011, cash and cash equivalents of Lockheed Martin were $3.27 billion versus $2.26 billion at fiscal-end 2010. Long-term debt rose marginally to $5.03 billion versus $5.02 billion in fiscal-end 2010. Lockheed Martin generated $843 million in cash from operations in the second quarter, compared with $1.20 billion in the year-ago quarter. The shortfall came due to higher pension liabilities and severance charges.
The Zacks Consensus Estimates for third quarter 2011, fiscal year 2011 and fiscal year 2012 are currently pegged at $1.81, $7.54 and $8.80 per share, respectively.
Lockheed Martin is the largest U.S. defense contractor with a platform-centric focus, steady inflow of follow-on orders and leveraged presence in the defense services and IT programs. However, the ongoing trend of governmental delays in program decisions coupled with program cancellations have affected the fortunes of the defense industry in general and Lockheed Martin in particular.
Lockheed Martin currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Considering the fundamentals, we are maintaining our ‘Neutral’ recommendation on the stock. Reductions in defense budgets, which are likely to hurt the company’s profitability, induce us to remain on the sidelines.
The cautious outlook is reflected across the board in the defense and aerospace industry. Of Lockheed Martin’s major peers, General Dynamics Corporation (GD) and The Boeing Company (BA) are also retaining a short-term Zacks #3 Rank.
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