Executive Summary – Lockheed Martin

FIN-450 Optional Earn-up Assignment

25 points

While there is no minimum word-count or specific rubric to this assignment, a reasonable amount of thought, along with concise, professional writing and a quality deliverable is expected.

For each part below:

1. Think through, in depth, what the question, data, and calculations are telling you – how are you interpreting the information and why does it matter?
2. Share your thoughts and findings in to one paragraph – target a one-page (in total) written executive summary.

Part 1: Business Model

What type of company is Lockheed-Martin (manufacturer, wholesaler, retailer, service, or a combination thereof)?  How does this play into the company’s sales and customer service strategy?

About Us | Lockheed Martin

Part 2: Financial Performance

Using data from Lockheed-Martin’s income statement:

What was the percentage change in total revenue from 12/31/2021 to 12/31/2022?  What do you think drove this?

What is the cost of revenue as a percent of sales for 12/31/2021? For 12/31/2022?  Is this a positive or negative trend?  What do you think contributed to the change?

What is the Net Income Common Stockholders as a percent of sales for 12/31/2021? For 12/31/2022?  Is this a positive or negative trend? What do you think contributed to the change?

Using data from Lockheed Martin’s balance sheet:

Lockheed Martin Corporation (LMT) Balance Sheet – Yahoo Finance

How much did Lockheed-Martin’s working capital position change from 2019-2020? 2020-2021? 2021-2022?  What do you think contributed to this?  Does it make sense (based on your assessment of Lockheed Martin’s industry type)?  Why or why not?

Part 3: Required Return and Valuation

Calculate Lockheed-Martin’s required return using the CAPM model with the following inputs:

Risk free rate (10-year treasury)        3.9%

Market return (SPY 10-year avg)        11.5%

Intel’s beta                                          .68

Lockheed-Martin paid the following quarterly dividends:

Lockheed Martin Corporation (LMT) Stock Historical Prices & Data – Yahoo Finance

What is the average annual dividend growth rate from 8/6/19 to 2/6/23? Assume that growth rate continues. Using the dividend growth model and required return, what does the model say Lockheed-Martin’s stock should be valued at?

Part 4: Assessment

Investor Overview | Lockheed Martin Corp

Based on your review of the company, its financial performance, risk profile, and dividend pay-out, do you think the current LMT share price of $475.75 is fairly priced?  Why or why not?

Would you buy the stock at its current price?  Why or why not?