Sep 24, 2020
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Will Lockheed Martin Continue To Outperform Textron?

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The Lockheed Martin logo and a model of their F-35 Lightening fighter inside the company s hospitality. [+] IN PICTURES VIA GETTY IMAGES Textron stock (NYSE: TXT) has declined by just about 15% since early February after the WHO declared the Coronavirus a world health emergency while Lockheed Martin stock (NYSE: LMT) has fared slightly better and lost only 9% of its value

 

While travel restrictions internationally are negatively affecting multiple sectors of the worldwide economy the long-term defense procurement contracts by the us government has supported military suppliers and contractors. In 2019 the us government contributed nearly 71% and 24% of Lockheed Martin and Textron s total revenues respectively. Thus Textron s higher exposure to the commercial aviation industry has been a drag on its revenues and earnings in the course of the pandemic

 

Therefore Trefis expects Textron stock to continue to underperform Lockheed Martin inside the near-term. We compare trends in key metrics of Lockheed Martin and Textron through the years to establish their relative valuations under the current circumstances in an interactive dashboard analysis Lockheed Martin Will Continue To Outperform Textron Supported By Stronger Order Backlog

 

Why Has LMT Outperformed TXT Over Recent Months? LMT s P/E in line with 2019 earnings has improved from 17. 4x in 2019 to 17. 5x currently while TXT s multiple has declined from 12. 7x to about 11. 1x. The steeper decline in Textron s multiple may be attributed to its shrinking order backlog declining demand for private jets and the continuing employee furloughs

 

While Lockheed Martin s multiple appears high when compared with prior years the corporate delivered robust earnings even during crisis. LMT s second-quarter revenues increased by 12% and its order backlog surged by $7 billion to $150 billion. Whereas Textron s order backlog declined by $0. 8 billion to $9 billion primarily using tepid demand for its Beechcraft and Cessna aircraft

 

As Textron s Aviation segment contributes almost 40% of the full revenues we predict the stock to continue facing headwinds inside the near-term. PROMOTED Civic Nation BRANDVOICE | Paid Program
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