Lockheed Martin (LMT) shares rose another 3.3% by 12:35 p.m. ET Monday after three Wall Street analysts weighed in positively. Morgan Stanley's Kristine Liwag cites a 10-year Air Force contract to produce F-35 jets at 156 aircraft per year as reducing downside risk, and sees missile production lifting revenue in the mid-teens over the next five years; she would upgrade the stock to overweight with an $835 per-share target over the next year. Bank of America and JP Morgan kept neutral ratings but raised price targets to $620 and $665, respectively. Bank of America's Ronald Epstein worries that higher F-35 volume at likely bulk rates could squeeze margins, since aeronautics, with $30.6 billion in annual revenue, already posted operating margins below 7% last year, versus 13% for missiles. The article argues that at a price-to-free cash flow ratio below 17x, a long-term earnings growth rate near 18%, and a 2.4% dividend yield, the stock is cheap enough to be worth the risk.
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