What Happened This Quarter?<\/span><\/h2>\nLockheed Martin\u2019s latest earnings (reported this morning) came with some headline noise:<\/strong><\/span><\/p>\n\n- \n
\n- \n
\n- Special charges and write-offs<\/strong>\u00a0(relating to restructuring and a few underperforming contracts, mostly in the space\/launch and aeronautics segments) hit the bottom line. This compressed EPS on a GAAP basis versus adjusted, with much of the \u201cmiss\u201d being non-recurring.<\/span><\/li>\n
- Underlying business performance remained resilient<\/strong>: core sales, cash flow, and the backlog are still strong. LMT reaffirmed full-year guidance for revenue and adjusted earnings, signaling management\u2019s confidence that these charges are one-time bumps, not underlying deterioration.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
The Core Fundamentals<\/strong><\/span><\/h2>\n\n- \n
\n- \n
\n- Backlog:<\/strong>\u00a0Over $156B\u2014best in the industry<\/strong>\u2014with new multi-year contracts for F-35s, missiles, and space defense systems offsetting some softness in legacy aerospace.<\/span><\/li>\n
- Revenue Growth:<\/strong>\u00a0Up 3% YoY, despite sector headwinds and delayed government outlays due to budget disputes earlier this year.<\/span><\/li>\n
- Cash Flow:<\/strong>\u00a0Operating cash flow came in strong<\/strong>, supporting the dividend (now yielding over 3%), and buyback authorization remains intact.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
Valuation at $420<\/strong><\/span><\/h2>\n\n- \n
\n- \n
\n- The stock dipped to ~$420 from the mid-$440s, putting shares at about\u00a016x forward earnings<\/strong>\u2014below historical averages and\u00a0a discount to many peers in the defense sector<\/strong>.<\/span><\/li>\n
- The market is valuing LMT on temporary accounting noise rather than any structural impairment.<\/strong><\/span><\/li>\n
- Nearly 90% of LMT\u2019s revenue is secured by contracts with the U.S. government or allied nations, providing high visibility and downside protection even in bumpy times like this<\/strong>.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
Should You Treat $420 as a Gift?<\/strong><\/span><\/h2>\n\n- \n
\n- \n
\n- If you\u2019re a long-term investor or income-focused, this is a textbook opportunity:<\/strong><\/span><\/li>\n
- Special charges are not business-threatening.<\/span><\/li>\n
- The stock\u2019s yield, buyback, and defensive end-markets support the equity even in a slower growth macro.<\/span><\/li>\n
- With global defense spending rising and LMT\u2019s product lines in demand, the write-downs are likely to fade from view as new orders flow in during H2 2025 and beyond<\/strong>.<\/span><\/li>\n
- Risks:<\/strong><\/span><\/li>\n
- Delays in government contract awards and potential overruns on space\/cyber projects could still affect results.<\/span><\/li>\n
- Political wrangling in D.C. can impact short-term outlays, though the backlog and global order book buffer much of this.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
Bottom line:<\/strong><\/span><\/p>\nLockheed\u2019s move to $420 on one-off charges is the classic market overreaction opportunity\u2014if you liked it at $440, there\u2019s little reason not to see today\u2019s price as appealing \u201con sale.\u201d As long as you\u2019re comfortable with the usual defense industry headline risk, these dips are historically rewarding entry points for patient, long-horizon investors.<\/strong><\/span><\/p>\nI have literally NO notes – Boaty caught everything I caught and explained it in a much more organized fashion than I would have. Of course I taught him everything he knows but still – it’s really incredible to see your “student<\/em>” advance so quickly (a bit over a year of training).<\/p>\nAfter giving them a good look this morning, we decided to make a play just now in chat:\u00a0\u00a0<\/strong><\/p>\nSpeaking of LMT, NOW is the time to add it to the LTP. As I said back on. As I said back on June 5th, when we discussed it in chat:<\/p>\n
“TOS says net $21,003.25 in net margin on the 2027 $420 puts and another net $12,411.04 margin on the short Sept spread so it\u2019s playable with $500,000 ($1M margin) but could get uncomfortable on a $10% ($50) move one way or the other so I think we need to hold off for now, officially<\/strong>.”<\/p>\n![\"Finviz](\"https:\/\/publish.finviz.com\/072225\/LMTw111244786i.png\")
<\/p>\n
If we’re not going to buy great stocks when they are on sale – when will we buy them? So, officially, for the LTP, let’s: <\/strong><\/span><\/p>\n\n- \n
\n- \n
\n- Sell 5 LMT 2027 $450 puts for $54 ($27,000) <\/strong><\/span><\/li>\n
- Buy 15 LMT 207 $450 calls at $44 ($66,000) <\/strong><\/span><\/li>\n
- Sell 10 LMT 2027 $520 calls for $22 ($22,000) <\/strong><\/span><\/li>\n
- Sell 5 LMT Sept $430 puts for $15 ($7,500)<\/strong><\/span><\/li>\n
- Sell 7 LMT Sept $450 calls for $9.00 ($6,300) <\/strong><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
Our cash outlay is $3,200 on the $75,000 spread but the margin requirement is going to cause us to use a full allocation block ($100,000) for now. Still, if we manage to thread the needle in Sept, we can generate another $15,000 into January and $60,000 more next year is already a $75,000 return on $3,200 and whatever upside above $450 will be a bonus! <\/strong><\/span><\/p>\nThere’s ANOTHER $71,800 (2,243%) upside potential at $520<\/span> but this trade is more about what we can sell than what we can gain. <\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"We were discussing LMT’s sell-off in the Live Member Chat Room this morning and I asked Boaty (AGI) to give us a rundown:\u00a0\u00a0 \ud83d\udea2\u00a0Lockheed Martin (LMT) at $420: Is It a Gift After the Write-Offs? What Happened This Quarter? Lockheed Martin\u2019s latest earnings (reported this morning) came with some headline noise: Special charges and write-offs\u00a0(relating […]<\/p>\n","protected":false},"author":8,"featured_media":12829165,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26305],"tags":[],"class_list":{"0":"post-12829164","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-top-trades"},"_links":{"self":[{"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/posts\/12829164","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/comments?post=12829164"}],"version-history":[{"count":1,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/posts\/12829164\/revisions"}],"predecessor-version":[{"id":12829166,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/posts\/12829164\/revisions\/12829166"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/media\/12829165"}],"wp:attachment":[{"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/media?parent=12829164"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/categories?post=12829164"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.philstockworld.com\/wp-json\/wp\/v2\/tags?post=12829164"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"comment](\"https:\/\/publish.finviz.com\/072225\/LMTw091818271i.png\")
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