Comments on: Lockheed Martin Corporation (NYSE: LMT) http://www.jonathangoldberg.com/2009/08/gunning-for-lockheed-martin-corporation.html Investment ideas, research findings and general discussion of all things value investing. Sun, 15 Aug 2010 07:32:58 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: Jonathan Goldberg http://www.jonathangoldberg.com/2009/08/gunning-for-lockheed-martin-corporation.html/comment-page-1#comment-26 Jonathan Goldberg Wed, 26 Aug 2009 04:57:38 +0000 http://caratsplus.com/?p=24#comment-26 You're very welcome Daniel. You're very welcome Daniel.

]]> By: Jonathan Goldberg http://www.jonathangoldberg.com/2009/08/gunning-for-lockheed-martin-corporation.html/comment-page-1#comment-25 Jonathan Goldberg Wed, 26 Aug 2009 04:54:36 +0000 http://caratsplus.com/?p=24#comment-25 Thanks, Luis. It will be interesting to see how high this stock goes when the company isn't affected negatively by budget cuts. Also it seems that even if it is, they aren't talking negative growth. The 3% growth assumed should be conservative enough.<br /><br />The breakdown is as follows (in millions $US):<br /><br />Revenue (TTM) - 43,318<br />-> Normalized (over 10 years) operating profit - 3,563.5<br />Add: adjustments for operating lease interest and growth spending - 219.4<br />-> Normalized EBIT - 3,782.9<br />Less: taxes on EBIT (35% tax rate) - 1,324.02<br />Add: Depreciation and amortization - 857<br />->Gross cash flows - 3,315.9<br />Less: Zero growth capex - 388<br />-> Normalized zero growth cash flows - 2,928<br /><br />Divided by WACC yields an EPV (enterprise value) of 45,663.7<br />Add: Cash and investments - $2,672<br />Less: Underfunded pension plans (after tax value) - 9,081.8<br />Less: Debt (fair value) - 4,782<br />Less: Value of capitalized operating leases - 945.96<br />Less: Value of stock options - 235<br />Divide by shares outstanding (390M) -> EPV per share 0f $85.36<br /><br />Using the equation for the growth multiplier as taught by Greenwald yields a multiplier of 1.27 at 3% growth - > intrinsic value = $108.52<br /><br />Hope this helps!<br /><br />Best,<br />Jonathan Thanks, Luis. It will be interesting to see how high this stock goes when the company isn't affected negatively by budget cuts. Also it seems that even if it is, they aren't talking negative growth. The 3% growth assumed should be conservative enough.

The breakdown is as follows (in millions $US):

Revenue (TTM) – 43,318
-> Normalized (over 10 years) operating profit – 3,563.5
Add: adjustments for operating lease interest and growth spending – 219.4
-> Normalized EBIT – 3,782.9
Less: taxes on EBIT (35% tax rate) – 1,324.02
Add: Depreciation and amortization – 857
->Gross cash flows – 3,315.9
Less: Zero growth capex – 388
-> Normalized zero growth cash flows – 2,928

Divided by WACC yields an EPV (enterprise value) of 45,663.7
Add: Cash and investments – $2,672
Less: Underfunded pension plans (after tax value) – 9,081.8
Less: Debt (fair value) – 4,782
Less: Value of capitalized operating leases – 945.96
Less: Value of stock options – 235
Divide by shares outstanding (390M) -> EPV per share 0f $85.36

Using the equation for the growth multiplier as taught by Greenwald yields a multiplier of 1.27 at 3% growth – > intrinsic value = $108.52

Hope this helps!

Best,
Jonathan

]]> By: Daniel M. Ryan http://www.jonathangoldberg.com/2009/08/gunning-for-lockheed-martin-corporation.html/comment-page-1#comment-24 Daniel M. Ryan Wed, 26 Aug 2009 04:10:16 +0000 http://caratsplus.com/?p=24#comment-24 Thanks for your take on Lockheed. Thanks for your take on Lockheed.

]]> By: luisitoahumada http://www.jonathangoldberg.com/2009/08/gunning-for-lockheed-martin-corporation.html/comment-page-1#comment-23 luisitoahumada Tue, 25 Aug 2009 23:36:45 +0000 http://caratsplus.com/?p=24#comment-23 Hey Jonathan - As always, great writeup. I actually own stock in LMT - I bought some during the crash in March. I agree that the stock should be well worth 100+ dollars. I would love to see the breakdown of your EPV calculation and the growth multiple / assumptions you use to reach your intrinsic value target.<br /><br />All the best,<br /><br />Luis Hey Jonathan – As always, great writeup. I actually own stock in LMT – I bought some during the crash in March. I agree that the stock should be well worth 100+ dollars. I would love to see the breakdown of your EPV calculation and the growth multiple / assumptions you use to reach your intrinsic value target.

All the best,

Luis

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