LMT's Sales Dip Casts Shadow Over Earnings Beat

The company's aeronautics business lost $225 million on a classified program

Digital Content Manager
Jul 26, 2021 at 10:19 AM
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The shares of Lockheed Martin Corporation (NYSE:LMT) are down 3.2% to trade at $368.23 this morning, even after the aerospace name posted better-than-expected second-quarter earnings of $7.13 per share, and raised its 2021 profit outlook thanks to strong quarterly sales in its rotary and mission systems business and space unit. Instead, what is hurting the jet maker is a sales miss for its main aeronautics business, which suffered a loss of about $225 million on a "classified" program. The firm also wound up lowering its full-year sales outlook for its aeronautic unit by $175 million. 

The security has been trading sideways on the chats since mid-June, as it struggles with fierce overhead pressure at the $385 level. The 130-day moving average contained LMT's last pullback to the $367 mark, however, and over the last six months the equity has added 7.2%.

Despite today's negative price action, analysts are optimistic towards Lockheed Martin stock. Of the 11 in question, seven call it a "strong buy," while four carry a "hold" rating. Plus, the 12-month consensus target price of $427.37 is a 16.1% premium to current levels.

The options pits reflect that optimism, with calls popular. This is per LMT's Schaeffer's put/call open interest ratio (SOIR), which stands higher than only 6% of readings from the past 12 months. This means short-term options traders have rarely been more call-biased.  

Drilling down to today's options activity, 6,168 calls and 3,419 puts have crossed the tape, which is six times the intraday average. Most popular is the weekly 7/30 380-strike call, followed by the September 355 put, with positions currently being sold to open at the former. 

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