Is Lockheed Martin’s Share Buyback Program a Good Deal? презентация

Latest Share Buyback
Program a Good Deal for Shareholders?

By Sean O’Reilly

it advisable for a company to repurchase its shares: First, the company has available funds -- cash plus sensible borrowing capacity -- beyond the near-term needs of the business and, second, finds its stock selling in the market below its intrinsic value, conservatively calculated.”
-- Warren Buffett, 1999 Berkshire Hathaway Chairman’s Letter to Shareholders

an additional $3 billion in authorized share repurchases on Sept. 24, 2015
This is in addition to spending over $9.5 billion on repurchases over the last 5 years

billion, and free cash flow of over $3 billion in FY 2014
The quarter ended June 28, 2015 was decent, with sales coming in at $11.643 billion, up 2.9% over last year
Net earnings were up for the quarter 4.5% to $929 million

Systems, Missiles and Fire Control, Mission Systems and Training, and Space Systems – are leaders in their fields and generate strong returns
Of particular note is its aeronautics business segment which includes the F-35 Lightning II Joint Strike Fighter
Net sales for the F-35 program represented approximately 19% of total consolidated net sales for the six months ended June 28, 2015
Lockheed’s F-35 fighter jet remains the stealth fighter of choice for the U.S. Air Force, England, and numerous other countries

global military and commercial helicopter manufacture and design, for $9 billion in cash from United Technologies
Acquisition will be funded through a combination of available cash and debt
This acquisition and continued share buybacks can both be funded thanks to balance sheet strength and significant free cash flow generation

prime example of intelligent capital allocation, or a waste of shareholders’ money?

the last 5 years buying back stock, much of it at much lower prices than the stock trades for today – particularly in 2011 and 2012
Argument for further buybacks supported by reasonable P/E ratio and exceptional returns on capital

according to S&P Capital IQ
Earnings per share are expected to grow 9.38% annually through 2019
This compares favorably with the S&P 500 Index’s current P/E ratio of 18.96
Would you want to own LMT at current valuation or the S&P 500?

of the market
Boasts strong competitive position in all its business segments
Generates significant free cash flow every year after capital expenditures and R&D
Latest buyback program isn’t as good a deal as in recent years, but seems reasonable in light of taxation of any dividends paid out