Key Points
Investment bank Bernstein cuts Lockheed price target on worries over defense funding in Congress.
Vertical Research analyst Robert Stallard points out that funding for Patriot missiles seems secure.
At 20x earnings, Lockheed stock looks like a good bet.
Lockheed Martin (NYSE: LMT) stock jumped 3.3% through 1:55 p.m. ET on Wednesday.
You can thank Vertical Research for that.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Lockheed Martin.
Vertical Research loves Lockheed Martin stock
Two separate research notes came out on Lockheed Martin this morning. Investment bank Bernstein took the under, cutting its price target on the defense stock to $564 amid worries about potential delays in defense funding in Congress this year and concerns that "the path to a budget remains uncertain," as TheFly.com reports.
Not to worry, though, says Vertical Research analyst Robert Stallard. "While there is much uncertainty about the outlook for the U.S. defense budget," one place where funding seems secure is spending to acquire missiles for air defense after the Iran war severely eroded stockpiles of Patriot missiles.
And Lockheed Martin, of course, builds the Patriot.
What's next for Lockheed stock?
The need to buy new missiles to replace those that have been used up means a large part of Lockheed Martin's revenue pipeline is probably secure, whatever happens to the rest of the defense budget. And with Lockheed stock down 23% since its highs earlier this year -- and down 14% over just the last two months-- now may be a good time to get in and buy some Lockheed stock.
In fact, that's exactly what Stallard recommends -- initiating coverage of Lockheed stock with a buy rating and a $600 price target.
With Lockheed stock priced below 20 times earnings today, paying a 2.9% dividend, and expected to grow earnings better than 17% annually over the next five years, the price looks right to me, too.
Lockheed Martin stock is a buy.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lockheed Martin. The Motley Fool has a disclosure policy.