Lockheed (LMT) lowers guidance; Sherwin-Williams (SHW) flags supply woes

Highlights

  • Lockheed Martin Corporation (NYSE: LMT) net sales decreased by 3% YoY to US$16.0 billion compared to US$16.5 billion in the corresponding quarter of 2020. 
  • Sherwin-Williams Company’s (SHW) diluted net income per share fell to US$1.88 apiece from US$2.55 per share in the comparable period of 2020.

  • Sherwin-Williams CEO John G. Morikis said the ongoing supply chain challenges combined with high raw material costs negatively impacted the quarterly performance.

Defence firm Lockheed Martin Corporation (NYSE: LMT) and paint and coating manufacturer Sherwin-Williams Company (SHW) reported their third-quarter results on Tuesday.

The LMT stock fell over 10%, while the SHW stock rose about 2% in intraday trading. Supply woes and declining sales negatively impacted their quarterly performance.

Third-quarter highlights

Sherwin-Williams Company

CEO John G. Morikis said the ongoing supply chain challenges and high raw material costs negatively impacted the quarterly performance despite strong demand in the architectural and industrial-related markets.

Morikis said product prices had been increased to offset the high material costs. He expects the company to return to a high double-digit growth as inflation headwinds eventually subside.

During the quarter, the company has invested in long-term growth initiatives. Morikis said it opened 19 new stores, carried out two acquisitions and purchased 1.675 million shares.

The company’s consolidated net sales increased by 0.5% to US$5.15 billion in the quarter.

However, net sales in the US and Canada stores declined by 2.8% YoY in the quarter. Morikis said the raw material shortage has negatively impacted sales in the North American markets.

The company’s diluted net income per share fell to US$1.88 apiece from US$2.55 per share in the comparable period of 2020. Likewise, the adjusted diluted net income per share decreased to US$2.09 per share against US$2.76 per share in the year-ago quarter.

EBITDA fell to US$834.2 million, or 16.2% of sales, in the quarter. Meanwhile, it expects its adjusted diluted net income per share for FY21 to be in the range of US$8.35 to US$8.55 per share.

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The SHW stock rose more than 31% YTD. Its 52-week highest and lowest prices were US$310.75 and US$218.06, respectively.

In addition, the P/E ratio is 39.68, and the forward P/E one-year ratio is 36.48. Its EPS is EPS $7.97, and the annualized dividend is US$2.20.

Sherwin-Williams’ current market cap is around US$83.261 billion.

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Earning update: Sherwin-Williams Company (SHW) and Lockheed Martin Corporation (NYSE: LMT).

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Lockheed Martin Corporation (NYSE: LMT) 

Lockheed reported net sales of US$16.0 billion for the third quarter, compared to US$16.5 billion in the corresponding quarter of 2020. 

The Aeronautics segment generated net sales of US$6,568 million, down 2% or US$112 million from the previous year; Missiles and Fire Control net sales were US$2,781 million, down 6% YoY. The Rotary and Mission Systems net sales decreased by 0.45% to US$3,980 million, and Space segment net sales fell by 5% to US$2,699 million from the previous year’s quarter.  

The net earnings from continuing operations were US$0.614 billion, or US$2.21 per share, compared to net earnings of US$1.8 billion, or US$6.25 per share, in Q3 of 2020, reflecting a 66% decline YoY. The net earnings are after deducting a non-cash pension settlement charge of US$1.7 billion.

Its cash from operations was US$1.9 billion in the September quarter of 2021. The company increased the share repurchase plan by US$5.0 billion. It also raised the quarterly dividend rate to US$2.80 per share.

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Lockheed revised the outlook for full-year 2021. The company expects net sales to be approximately US$67,000 million, lower than previous expectations in August.

Business segment operating profit to be around US$7,350 million and adjusted diluted earnings per share to be approximately US$27.17. The cash from operations is also to remain higher than or equal to US$8,300 million for the full year 2021.

For FY2022, the company expects net sales to decline to approximately US$66 billion and business segment operating margin to be about 11.0%. The cash from operations for 2022 to remain higher than or equal to US$8.4 billion.

The Maryland-based Lockheed Martin is a global defense contractor. It provides high-end fighter aircraft, missiles and missile defense systems, and space systems. 

The aerospace company has a market capitalization of US$93 billion, a P/E of 13.18, a dividend yield of 2.78%, and an annualized dividend of US$11.20.

The stock closed at US$376.33 on Oct 25, 2021.  

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Bottomline

The Dow Jones US Aerospace Total Stock Market Index (DWCARO) rose 9.87% YTD. In contrast, UPS rose 29.6%, while LMT fell 7% YTD. The industry has been badly affected due to the pandemic. Investors, however, should evaluate the companies carefully before investing in stocks.

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