Investors like certainty. They don’t always get it. Companies are often changing plans, either of their own volition or because of outside factors. For companies that have to contend with government contracts, negotiations can last for a long time. But so can contracts, once forged.
There’s some uncertainty amid the launch of Donald Trump’s second term. That extends in just about every facet of government, including the defense industry.
So it’s no surprise that a mixed outlook from Lockheed Martin (LMT) sent shares in a tailspin. However, Lockheed has a robust pipeline of government contracts, and the aerospace developer could be a big winner if European nations up their defense spending.
Lockheed is now up less than 15% over the past year, lagging the overall market. Historically, Lockheed has a history of outperforming over time. With shares trading at 17 times earnings, the recent selloff looks overblown.
Action to take: Investors may like Lockheed shares here, with the caveat that uncertainty may drive some wild swings in shares. If geopolitical events sour, however, shares will be worth owning.
At current prices, Lockheed pays a 2.6% dividend, which it has a history of growing over time.
For traders, shares are likely to recover some of their earnings-related selloff in the weeks ahead. The March $500 calls, last trading for about $2.85, can likely see high double-digit returns from a bounce higher in the coming weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.