DCF Studio

    LMT · NYQ · Industrials

    Lockheed Martin Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 739.47

    Market price

    USD 533.38

    Implied upside

    +38.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 739.47+38.6%
    Exit multiple
    USD 673.45+26.3%
    Market price
    USD 533.38

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn9bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 78.3bnUSD 81.8bnUSD 85.4bnUSD 89.1bnUSD 93.0bn+4.4%
    EBITUSD 8.9bnUSD 9.3bnUSD 9.7bnUSD 10.1bnUSD 10.6bn+4.4%
    NOPATUSD 7.6bnUSD 7.9bnUSD 8.3bnUSD 8.7bnUSD 9.0bn+4.4%
    Add depreciation & amortisationUSD 1.7bnUSD 1.8bnUSD 1.9bnUSD 1.9bnUSD 2.0bn+4.4%
    Less capital expenditureUSD -1.9bnUSD -2.0bnUSD -2.0bnUSD -2.1bnUSD -2.2bn+4.4%
    Less increase in working capitalUSD 152.8mUSD 159.5mUSD 166.5mUSD 173.8mUSD 181.4m-4.4%
    Free cashflow to firmUSD 7.6bnUSD 7.9bnUSD 8.3bnUSD 8.6bnUSD 9.0bn+4.4%
    Discount factor0.96760.90600.84830.79430.7437-
    Present valueUSD 7.3bnUSD 7.2bnUSD 7.0bnUSD 6.9bnUSD 6.7bn-2.3%
    Present Value Of The ForecastUSD 35.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.400Reported 0.104, pulled toward 1.0 (Blume)
    Cost of equity7.20%Risk-free + beta x equity risk premium
    Cost of debt5.33%Interest expense / average total debt
    Market capitalisationUSD 123.1bn85.0% of capital
    Total debtUSD 21.7bn15.0% of capital, book value as a proxy
    Tax rate14.4%Effective, capped at statutory
    WACC6.80%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 739.47

    82% of EV

    Forecast FCFF, final year
    USD 9.0bn
    Capex at depreciation, working capital in reinvestment
    USD 9.7bn
    Less reinvestment at g/ROIC (9.6% of NOPAT)
    USD -929.5m
    Capitalised
    USD 8.8bn
    ROIC (reported)
    26.0%
    Terminal value, undiscounted
    USD 208.6bn
    Terminal value, discounted
    USD 155.2bn
    Enterprise value
    USD 190.2bn
    Less net debt
    USD 17.6bn
    Equity value
    USD 172.7bn

    Exit at 14.9x EBITDA

    Value per shareUSD 673.45

    80% of EV

    Terminal value, undiscounted
    USD 187.9bn
    Terminal value, discounted
    USD 139.7bn
    Enterprise value
    USD 174.8bn
    Less net debt
    USD 17.6bn
    Equity value
    USD 157.3bn

    Spread between methods: 9%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.80%1055.251211.101434.391781.272394.21
    5.80%794.11875.65981.701125.381331.23
    6.80%631.54679.95739.47814.49912.06
    7.80%520.60551.72588.60633.04687.69
    8.80%440.08461.21485.60514.10547.88

    Outlined: this model. Green text: above today's price of 533.38. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year4.4%-1.9%-6.3pp
    EBIT margin11.4%8.3%-3.0pp
    Discount rate6.8%8.3%+1.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.