Which of the defense stocks do you like and why? Or do you hate the sector altogether? It is assumed that Obama will cut defense spending, but will that significantly hurt share prices? Or is that information already priced in? I am currently long LMT and have been since mid 2007, but am starting to take a hard look at GD. My time frame is 6 months to a year. Any longer/shorter than that is irrelevant to me. Anybody have any insight in this industry?
Lockheed Martin Raises Full-Year EPS View Tuesday April 21st, 2009 / 14h22 DOW JONES NEWSWIRES Lockheed Martin Corp.'s (LMT) first-quarter net income fell 8.8% on higher pension-related expenses, though the defense contractor raised its full-year profit outlook. Lockheed, the biggest supplier of information technology to the U.S. government, recorded net income of $666 million, or $1.68 a share, compared with $730 million, or $1.75 a share, a year earlier. The latest results included 19 cents in pension-related expenses, while the prior year's results were boosted 5 cents by a pension adjustment. Revenue increased 3.9% to $10.37 billion. Analysts polled by Thomson Reuters expected earnings of $1.64 and revenue of $10.51 billion. Lockheed posted a 5.2% increase in information systems and global services earnings, as revenue rose 10% on higher volume on enterprise civilian services. Aeronautics division profits grew 9.9% as revenue edged down 0.9% on declines in combat aircraft. Looking ahead, the company raised the range of its full-year earnings outlook to $7.15 to $7.35 a share from January's projection of $7.05 to $7.25. The company affirmed its revenue guidance of $44.7 billion to $45.7 billion. ... http://www.easybourse.com/bourse-ac...-falls-88prc-raises-full-year-eps-view-654498
Beat EPS estimates and raised forecast - very nice. Missed revenue estimates - not desirable but did reiterate full year revenue guidance. Analyst full year EPS estimates @ high side of LMT's full year EPS estimates which is risky but still a ways down the road until that comes into play. Overall I'd say good quarter considering the macro, I will remain long for now. Nice to hear Gates' plan won't affect 2009 EPS too.
Makloda is a strong advocate. See his thread Re defense stocks. He believes congressional opposition to cuts will be so strong as to prevent significant cuts. I don't agree, as i believe, in the end, Gates and Obama will prevail. These stocks should continue to do well for awhile however. But long term prospects are not good. My take is that there will be no choice but to cut back on defense expenditures, but when this will become significant is uncertain of course. Likely we will see it begin in the 2011 budget. I'm staying out of the sector as i think the bloom is off the rose. We will likely not see again the outsized profits that accrued during the unbriddled excesses of the recent Bush administration.
I also think that long term is sketchy. I as well see cuts coming in the near future, but how deep they will actually be remains to be seen. Opposition will surely come due to the loss of jobs that cuts will bring, but I agree that it is inevitable as they will have no choice but to cut. They will just have to face the facts that the jobs that were created in this sector due to beefed up spending will now be lost due to cuts. That being said, I think last quarter was good for LMT and am playing it long until further information.