Lockheed Martin and GE Aerospace are two major players in the aerospace and defense industry, with both stocks having shown varying levels of performance in recent years. GE Aerospace stock has experienced strong gains, increasing by 200% in the last three years, while Lockheed Martin stock has seen a more modest increase of 30% over the same period. Despite GE’s strong performance, Lockheed Martin is believed to be a better pick due to its current valuation and future prospects.
In terms of revenue growth, GE Aerospace has outperformed Lockheed Martin, with a 43% increase in pro forma revenue compared to Lockheed Martin’s 3% growth over the last 12 months. GE Aerospace’s revenue growth has been driven by its service segment, particularly in aftermarket demand for engine servicing and aircraft maintenance. On the other hand, Lockheed Martin’s revenue growth has been fueled by higher production volumes in various programs, including the F-35 and national security space program.
While GE Aerospace may have better revenue growth, Lockheed Martin is seen as being more profitable and having a stronger financial position. GE Aerospace’s EBIT margin expanded from -19.1% to 29.5% over the last few years, indicating improved profitability. Additionally, GE Aerospace has a lower debt-to-equity ratio and higher cash reserves compared to Lockheed Martin, suggesting a more stable financial position.
Looking ahead, GE Aerospace is expected to see continued sales growth, with an estimated increase of around 20% over the next three years. In comparison, Lockheed Martin is projected to see a more modest sales increase of under 10% over the same period. Despite GE Aerospace’s strong revenue growth and profitability, Lockheed Martin is favored due to its attractive valuation and potential for growth in the current geopolitical environment.
Lockheed Martin’s stock is currently trading at a forward P/E ratio of 18x, compared to GE Aerospace’s ratio of 40x. This suggests that investors may see more upside potential in Lockheed Martin, as its stock is perceived as being undervalued relative to its earnings. With ongoing geopolitical tensions and increased defense spending in some countries, Lockheed Martin is expected to continue performing well, further justifying an uptick in its valuation multiple.
In conclusion, while GE Aerospace may have demonstrated strong revenue growth and profitability, Lockheed Martin is viewed as a better investment choice in the aerospace and defense industry. The company’s current valuation, robust prospects for growth, and solid performance across various segments make it a more attractive option for investors looking for long-term gains. By carefully evaluating these factors, investors can make informed decisions on where to allocate their resources in the ever-evolving aerospace and defense sector.
