AGU Fundamental Research Investment Analysis, Agrium Inc.

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The Razor’s Edge

2-Year Price History

Recent Price
(2/27/2009 4:02 PM)
52-Week Price
$63.11 – $120.30
Market Capitalization
$25.3 Billion
Dividend Yield
Most Recent Dividend

About Lockheed Martin Corp.

Lockheed Martin Corporation is considered to operate in the Industrial Goods sector. They specifically operate in the Aerospace – Defense- Products/Services business segment contained within the Aerospace/Defense industry.

The Company is engaged in the research, design, development, manufacture, operation and sustainment of advanced technology systems and products and provides a range of management, engineering, technical, scientific, logistic and information services.

Ockham’s Rating

As frequent users of Ockham Research are aware, we strive to adhere to the principal of Ockham’s Razor. This company ideal drives us to keep our stock analysis as simple as possible, but of course, no simpler than is necessary. It is in that vein that we focus much of our analysis on fundamental factors, peer analysis, and valuations versus historically normal ranges. However, we also apply standard deviation and volatility studies for each index and sector in order to understand more completely the risks associated with each market environment.

It is always scary to upgrade stocks in a market where everything seems to be headed downwards, but it is important to remember that these drops in price are often the best time to buy a bargain. We are not yet ready to upgrade LMT as of this week’s report because the fundamentals have not crossed a strategic threshold in our methodology, but we are certainly becoming more interested in some of the value that is being uncovered in this market downturn.

As far as price is concerned, a decrease has occurred in LMT’s price from $77.78 as of 02/21/2009 to a price of $63.11 as of 02/28/2009. This decrease of 18.86 will not cause an upgrade this week, but it may demonstrate an increase in the attractiveness of LMT should the fundamentals hold at their current levels or better.

Second, since our last report, there have been no significant adjustments in earnings expectations or guidance.

LMT Stock Evaluation

As discussed in our Recommendation Summary, we have reiterated our Fairly Valued on LMT at this time. There has been a relatively large decline in price over the last week of 18.86%, but there has not been any additional guidance on earnings from LMT. We are specifically looking for more attractive valuations for LMT before we would consider any change to our recommendation. So, while a decrease in price of this magnitude is a step toward a more positive valuation, we have not reached our valuation thresholds yet.

LMT Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company’s stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, LMT the high and low end of the Price to Sales per share ratios are 0.49x and 0.33x respectively.

Notice that LMT’s current Price to Sales per share ratio is 0.57x, which is high enough compared with historical norms of LMT to cause some concern. The current Price to Sales per share is near the upper end of the historical range. In our eyes, this is a negative factor because it is more likely that it will return to the normal range than continue rising outside of the range. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 37% merely to return LMT to its historical average.

LMT Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. LMT is above their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for LMT, the current level of Cash Earnings compared to its historical levels helps identify where LMT is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 7.15 and a historical low Cash Earnings per share ratio of 4.82, an investor can relate where value becomes optimal.

So, again, with a current Price to Cash Earnings per share ratio of 6.00, LMT is presently above its historical range. Ockham Research is always focused upon the value that investors have placed upon a given metric in the past. In other words, how much would an investor pay for a particular level of Cash Earnings in terms of stock price, and how does that relate to today. Naturally, we utilize proprietary methods to accomplish this, but the basic premise holds true and is simple to understand. For LMT, we are a bit negative on the Cash Earnings level given its higher than historical norm.

LMT Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don’t require dividend payments for company’s whose management has elected to forgo them entirely.

When reviewing dividend yields for LMT, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management’s confidence in the company. LMT’s estimated annual dividend is $2.28 resulting in a current dividend yield of 3.61%. The highest dividend yield from LMT over recent history was 3.61% while the lowest dividend yield was 0.62%. If you are looking for some “bang for your buck” then a dividend yield of 70.69% above the historical median should be enticing. LMT receives a positive boost in our view because as you know, equity at its core is simply a claim on future dividends.

Peer Comparison


Lockheed Martin Corp. Industry Grouping

Company Ticker Market Cap (Ml) Latest
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not incuding LMT) 5.04 5.09 » 32.07 0.49 0.43 » 1.54 7.13% 16.82%
*10 year range does not include current year values
Lockheed Martin Corp. LMT $25.3 Billion $63.11 6.00 6.94 » 30.81 0.57 0.28 » 1.23 9.51% 24.88%
The Boeing Company BA $22.8 Billion $31.44 3.48 4.22 » 19.26 0.33 0.40 » 1.25 3.83% 25.91%
Honeywell International, Inc. HON $19.7 Billion $26.83 4.83 4.63 » 77.26 0.51 0.47 » 1.95 9.61% 22.60%
General Dynamics Corp. GD $17.1 Billion $43.82 5.62 6.31 » 21.38 0.56 0.59 » 1.75 12.01% 19.20%
Raytheon Company RTN $16.6 Billion $39.97 6.88 7.15 » 25.19 0.70 0.35 » 1.32 4.91% 9.58%
Northrop Grumman Corp. NOC $12.2 Billion $37.36 4.41 3.13 » 17.28 0.36 0.33 » 1.43 5.28% 6.80%
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RazorWire™ & Community Discussion

Fast Money
2/24/2009 5:37 PM
Fast Money
Fast Money
You got to like the balance sheet for gites and the diversity of the businesses, the service contracts, that’s a big >> eds makes hewlett-packard 7 1/2 times forward earnings cheap by ibm. >> LOCKHEED MARTIN? >> beaten down because the expectation that the government is going to stop spending on defense. Lnp has a major global market and booked a $3 million with the
Closing Bell
2/24/2009 3:45 PM
Closing Bell
Take a look at some of the other the united arab emirates official news agency reporting that the country’s military appointed boeing and LOCKHEED MARTIN contracts with a total of $2.8 billion looking to provide transport planes. Pfizer dropping development of two late-stage experimental
Fox Business
2/19/2009 1:16 PM
Fox Business
>> stuart: I want you to take a look at LOCKHEED MARTIN stock down at $76 a share. It was supposed to replace the air force’s aging fighter fleet. Now the pentagon has pulled
Mad Money
2/13/2009 6:35 PM
Mad Money
Mad Money
Northrop grumman’s got a 3.93 dividend. We like to have what I regard as some earnings — well, you know i’m only going to do northrop grumman, because the one I also like, LOCKHEED MARTIN’s up a buck today, and that’s had too much of a move in a down day. Let’s go with noc. It has a nice yield. As it goes down, buy more. How about jeff in washington? Jeff?
Mad Money
2/13/2009 6:31 PM
Mad Money
Mad Money
Breathe! Axsys sells to all kinds of defense agencies, the dod, the border patrol and also the big defense contractors like raytheon, northrop grumman, boeing, LOCKHEED MARTIN. It’s got everybody, you know? And it may be only $830 million company, but it’s a legitimate one with real customers, because 90% of the company’s sales come
Power Lunch
2/2/2009 12:03 PM
Power Lunch
Associated with the aerospace and defense. Rockwell collins has been noticeably week. General electric, our parent company, that’s a new multiyear low for general electric. Drops below $12. LOCKHEED MARTIN on the weak take a quick look here at i’ve been telling you about the strength in the dollar. Mattel down big time today as they had a noticeable decline in
Squawk On The Street
2/2/2009 10:07 AM
Squawk On The Street
Take a look at some of the big industrial names. Many have defense components soshed with them, rockwell colin, general dynamics, LOCKHEED MARTIN, our parent company general electric is hitting a new low. The important thing about mattel is when we’ve seen international sales down 20%. A good part of that, half, was
Street Signs
1/29/2009 2:35 PM
Street Signs
Broader indexes over that two-week period 3-d 3m, old dominion, the trucking company, LOCKHEED MARTIN, and republic services, the trash company. All strong within a weak sector. >> had to bring in a trash thank you, matt. Rick, what are you seeing on the bond side?
Fast Money
1/22/2009 5:09 PM
Fast Money
Fast Money
Say that, but then it’s, like, okay that job’s gone. That money wasn’t there. >> there are people at this desk who don’t want that job. >> we’ll talk about something LOCKHEED MARTIN, a 5% mover while we’re talking on the defense front, where do we stand obama wise some. >> I think if you look at what happened to LOCKHEED MARTIN over the last six months it went tw 120 to the 70s. A lot of people fearing that once obama comes in, big-ticket items would get cut. LOCKHEED MARTIN with the big ticket items being cut are cheap. They boat the quarter and lowered eps guidance and they raised revenue guidance and the street said I still like when
Closing Bell
1/22/2009 4:30 PM
Closing Bell
The discount carrier says it sees savings of $1 billion this year due to falling fuel prices. The news sending the stock take a look. 16% higher. $9.70 a share. Defense contractor LOCKHEED MARTIN reports its fourth quarter profit was up 3%. The company made $823 million. But the company is cutting its full-year outlook due to
Fox Business
1/22/2009 1:20 PM
Fox Business
>> stuart: take a look, please, at LOCKHEED MARTIN. It beat expectations today. Largest supplier to the pentagon.
The Opening Bell on Fox Business
1/22/2009 9:34 AM
The Opening Bell on Fox Business
We were seeing 20%, 30% moves and they’ve stabilized a little bit here, down 3%, for example, at j.P. Morgan chase, some of the other movers, LOCKHEED MARTIN, profits forecasts cut on some of the pension, we’re watching that one. American express, capital one financial, a lot of credit card companies are in focus as well.
Squawk Box
1/22/2009 7:55 AM
Squawk Box
Squawk Box
The medical company coming out with earnings of 91 cents. 2 cents above expectations, but the guidance for the first quarter is 80 cents to 82 cents. Street was looking for 83 cents. LOCKHEED MARTIN looks like it’s indicated a little lower this it did beat earnings for the fourth quarter. $2.05 versus the street estimate of $1.92. The guidance for 2009 is below where the street is. They’re now talking about $7.05
View All Lockheed Martin Corp. Comments

Key Fundamentals

LMT – Lockheed Martin Corporation Fundamentals
Price (2/27/2009 4:02 PM) $63.11
Volume (2/27/2009 4:02 PM) 7.5 Million
10 Day Average Volume 4.0 Million
13 Week Price Range $63.11 – $85.90
52 Week Price Range $63.11 – $120.30
LTM Revenue $42.7 Billion
Shares Outstanding (12/2008) 400.6 Million
Market Capitalization $25.3 Billion
Shares Held By Institutions 357.1 Million
Institutional Holders 870
% Shares Held By Institutions 89.10%
Earnings Per Share (EPS) $7.86
P/E Ratio 8.00
Book Value Per Share $24.48
Gross Margin 13.20%
Quarterly Dividend 2.28
Dividend Yield 3.60%
Beta 0.92
Fiscal Year Ends December