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• Global security and aerospace company

• Sector: Industrials

• Industry: Aerospace and Defense

• SIC: 3761: Manufacturer of Guided Missiles and Space Vehicles

• Five Market Segments:• Aeronautics• Information Systems and Global Solutions• Missiles and Fire Control• Mission Systems and Training• Space

$45,358

21%

$86,623

41%

$31,218

15%

$24,661

12%

$23,706

11%

2013 Sales

Lockheed Martin

(LMT)Boeing (BA)

General Dynamics

(GD)Northrop

Grumman (NOC)Raytheon (RTN)

31%

18%17%

16%

18%

Total 2013 Net Sales: $45.4 B

Aeronautics ($14.1 B)

Information Systems &

Global Solutions ($8.4

B)Missiles and Fire Conrol

($7.8 B)

Mission Systems and

Training ($7.1 B)

Space Systems ($8 B)

31% of Net Sales ($14.1Billion)

Major Programs as shown on the 2013 10-K:

◦ F-35 Lightning Joint Strike Fighter 5th generation Stealth fighter 50% of Aeronautics sales

($7.05 billion)

◦ C-130 Hercules

◦ F-16 Fighting Falcon

◦ F-22 Raptor

◦ C-5M Super Galaxy

◦ Advanced Development Programs (Skunk Works)

18% of Net Sales ($8.4 billion) Nature of orders: Many small contracts

◦ Data analytics

◦ Cyber security

◦ Air traffic management

◦ Energy Management

◦ Network-enabled situational awareness

◦ Mission solutions for defense applications

Various classified national security systems

17% of Net Sales ($7.8 billion)

Primarily Military Service (Army):

◦ Missile and defense systems

◦ Logistics and technical services

◦ Fire control systems

◦ Mission operations support

◦ Manned & unmanned ground vehicles

16% of Net Sales ($7.1 billion)

Primarily Military Service (Navy):◦ Ship & submarine mission/combat systems

◦ Mission systems & sensors for rotary & fixed-wing aircraft

◦ Sea and land-based missile defense systems

◦ Radar systems

◦ Simulation & training services

◦ Unmanned systems & technologies

◦ Littoral Combat Ship (LCS)

18% of Net Sales ($8.0 billion)

Primarily US Government Agencies:◦ Satellites, Space Transportation Systems

& Missile Defense Systems Examples

Trident D5 Fleet Ballistic Missile

Space Based Infrared System (SBIRS)

Orion Multi-Purpose Crew Vehicle

◦ Classified National Security Systems

82%

17%1%

Total 2013 Net Sales:

$45.4 Billion

US Government

($37.228 B)

Foreign Military

Sales ($7.718 B)

US Commercial &

Other ($.454 B)

40,971 42,877

43,844 44,437 42,377 41,480 41,115

3,024

2,926 2,655

2,745

2,981 3,520 3,535

36,000

38,000

40,000

42,000

44,000

46,000

48,000

2009 2010 2011 2012 2013 P2014 P2015

$M

illions

Net Costs and Expenses Net Earnings

$43,995

$45,803$46,499

$47,182

$45,358$45,000 $44,650

2009 2010 2011 2012 2013 P2014 P2015EPS 7.86 8.03 7.90 8.48 9.29 11.00 11.40

40,971 42,877

43,844 44,437 42,377 41,480 41,115

3,024

2,926 2,655

2,745

2,981 3,520 3,535

36,000

38,000

40,000

42,000

44,000

46,000

48,000

2009 2010 2011 2012 2013 P2014 P2015

$M

illions

Net Costs and Expenses Net Earnings

$43,995

$45,803$46,499

$47,182

$45,358$45,000 $44,650

Sales - +4% +1.5% +1.5% -4.0% -1.0% -1.0%Net Inc - -3% -9.0% +3.0% +8.5% +18.% +0.4%

40,971 42,877

43,844 44,437 42,377 41,480 41,115

3,024

2,926 2,655

2,745

2,981 3,520 3,535

36,000

38,000

40,000

42,000

44,000

46,000

48,000

2009 2010 2011 2012 2013 P2014 P2015

$M

illions

Net Costs and Expenses Net Earnings

$43,995

$45,803$46,499

$47,182

$45,358$45,000 $44,650

SPS - +9% +9% +2% -3.0% +2% +2.5%EPS - +2% -2% +7% +9.5% +18% +3.6%

EPS 2011 2012 2013

LMT Basic 7.90 8.48 9.29 Diluted 7.81 8.36 9.13

*8/25/2014 Prices Used *FYE 2013 Earnings Used

*FYE 2013 Dividend Payments Used

0

2

4

6

8

10

12

2009 2010 2011 2012 2013

LMT

BA

GD

NOC

RTN

2013 Payout Ratio

LMT: 52%

BA: 32%

GD: 24%

NOC: 28%

RTN: 35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013

LMT

BA

GD

NOC

RTN

0

50

100

150

200

250

Adj Close

$187.19

+124%

$85.16

2014 October 31st: Systems Made Simple Acquisition

October 24th: $4 Billion F-35 Deal

October 15th: 10 year Hydrogen Fusion Project Announced

September 25th: $7.1 Billion F-35 Deal

September 22nd: $828 Million Trident Missile Contract

Strengths

A very strong relationship with the Pentagon

Improving operations efficiency in shrinking industry.

Product Diversification

Weaknesses

Debt levels

Expensive products

Opportunities Foreign Markets F-35 in high demand International tensions Possible creative destruction in energy sector Capabilities to lower costs

Threats Sequestration cuts High risk target for data breaches

8

10

12

14

16

18

20

22

24

2009 2010 2011 2012 2013

Historical Average P/E

LMT

BA

GD

NOC

RTN

Comparative Measures

Price EPS P/E Beta5 year EPS Growth

Growth to Beta

LMT $187 10.23 18.3 0.68 4.8% 0.07

BA 125 6.64 18.9 0.99 7.1% 0.07

GD 141 7.19 19.6 0.83 1.2% 0.01

NOC 137 9.27 14.7 0.77 1.9% 0.03

RTN 104 6.18 16.8 0.68 7.0% 0.10

Comparative Measures

Price EPS P/E Beta5 year EPS Growth

Growth to Beta

LMT $187 10.23 18.3 0.68 4.8% 0.07BA 125 6.64 18.9 0.99 7.1% 0.07

GD 141 7.19 19.6 0.83 1.2% 0.01

NOC 137 9.27 14.7 0.77 1.9% 0.03RTN 104 6.18 16.8 0.68 7.0% 0.10

Current JustifiedP/E 18x 23xPrice $187 $200-$240 +8% to 28%

As of 2000, dividends continue to grow:• At least 9%• Every 4 quarters

Current dividend per share payment is $1.50

Conservative 5 year projection: $2.36

Calculated present value of projected dividends: $29

Projected stock price growth per ValueLine: PV Higher price ($200): $159 Average ($180): $143 Lower price ($160): $127

Conservative Valuation: $156 Averaged Valuation: $172

P/E method weigted 50% (Averaged Figure)+ DDM method weighted 50% (Averaged Figure)

$205 per share

11/14/2014 Closing Price: $186.60.....Gain (Loss): + 10%

Buy Lockheed Martin◦ Demand for products are growing.

◦ International issues are growing tense.

◦ Strong relations with US government.

◦ High diversification.

Appendix

Fiscal Year End 2013

ROE ROA ROR&D

LMT: 61% 8.2% 4.28xBA: 31% 4.9% 1.49xNOC: 18% 6.4% 3.85xGD: 16% 6.6% 7.60xRTN: 18% 7.8% 4.32x

61%

31%

18% 18% 16%

0%

10%

20%

30%

40%

50%

60%

70%

LMT: BA: NOC: RTN: GD:

8%8%

7% 6%

5%

0%

2%

4%

6%

8%

10%

LMT: RTN: GD: NOC: BA:

7.6

4.32 4.283.85

1.49

0

2

4

6

8

GD: RTN: LMT: NOC: BA:

EPS 2011 2012 2013

LMT Basic 7.90 8.48 9.29 Diluted 7.81 8.36 9.13

*8/25/2014 Prices Used *FYE 2013 Earnings Used

*FYE 2013 Dividend Payments Used

0

2

4

6

8

10

12

2009 2010 2011 2012 2013

LMT

BA

GD

NOC

RTN

2013 Payout Ratio

LMT: 52%

BA: 32%

GD: 24%

NOC: 28%

RTN: 35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013

LMT

BA

GD

NOC

RTN

2013 2012 2011

Sales from Products $35,691 $37,817 $36,925

Sales from Services 9,667 $9,365 9,574

Total Sales $45,358 $47,182 $46,499

Total COGS -41,171 -42,986 -42,755

Operating Income 4,187 4,196 3,744

% of Sales 9.23% 8.89% 8.05%

EBIT $4,155 4,072 3,631

% of Sales 9.16% 8.63% 7.81%

Income Tax Expense -1,205 -1,327 -964

% of EIBT 29.00% 32.59% 26.55%

2013 2012 2011

Income Tax Expense -1,205 -1,327 -964

% of EIBT 29.00% 32.59% 26.55%

Other Income(Loss) from Discontinued Ops net of tax 31 0 -12

Net Income $2,981 $2,745 $2,655

Profit Margin 6.57% 5.82% 5.71%

Sales Growth (Geometric) 2011-2013 3.94%

2013 2012

Cash including marketable securities $2,617 $1,898

Inventory 2,977 2,937

A/R 5,834 6,563

Total Current Assets 13,329 13,855

Total Noncurrent Assets 22,859 24,802

Total Assets 36,188 38,657

Total Current Liabilities 11,120 12,155

Total LT Liabilities 20,150 26,463

Total Liabilities 31,270 38,618

Preferred Equity - -

Common Equity 319 321

Total Stock Holder's Equity 4,918 39

2013 2012

ROA 8.2% 7.1%

ROE 55.8% 6807.7%

Change in Revenue/Change in Cash -10.2%

Current Ratio 1.198651 1.13986

Quick Ratio 0.759982 0.696092

Working Capital 2,209 1,700

Equity as a % of Assets 13.6% 0.1%

Leverage 7.4 991.2

Inventory Turnover 26.2 12.5