In a concerted effort to return more value to its shareholders, the board of directors of Lockheed Martin Corporation (LMT) authorized a share repurchase program of up to $3 billion.
Lockheed Martin bought back 169 million shares out of the existing share authorization of 178 million shares through September 26.
The company’s share repurchase program was initiated in October 2002. The board has approved a buyback of 23 million shares, replacing a prior authority originally approved in 1995. Since then, the board has authorized five additional share repurchases to the existing program.
Lockheed Martin ended the third quarter with cash and cash equivalents of $2.7 billion, higher than $2.4 billion at fiscal-end 2009. Cash from operations totaled $3.4 billion in the first nine months of fiscal 2010. The company leverages its strong liquidity via timely share repurchases and dividend payments and expects to return half of its free cash to its shareholders.
Apart from buying back shares to enhance shareholder value, the company also consistently hikes dividends. Recently, in September, the board of directors approved an increase of 19% in its quarterly common stock dividend. The company will pay the increased dividend of 75 cents per share on December 31 to shareholders of record as of December 1.
The company spent $1.6 billion to repurchase 19.8 million shares and expended $700 million as cash dividend year to date.
During the third quarter conference call, the company guided earnings of $6.75 to $6.95 per share for full-year 2010.
The Zacks Consensus Estimate for fourth-quarter 2010 is $2.15 per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $7.18 per share and $6.72 per share.
Given the overhang of defense budget cuts, a receding order backlog, headwinds in margins, execution risk of major programs, cost over-runs, higher pension liability and risk of retrenchment cost recovery; we maintain our Underperform recommendation on Lockheed Martin over the long term. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates a near-term downward pressure on the stock over the near term.
Based in Bethesda, Maryland, Lockheed Martin Corporation is a diversified defense company that primarily researches, designs, develops, manufactures, integrates, operates and sustains technology systems and products, apart from providing a host of management, engineering, technical, scientific, logistics and information services.
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