Why Lockheed Martin Stock Is Volatile Today

Expectations were low for Lockheed Martin (NYSE: LMT) heading into earnings season, but the company's results turned out better than some had expected.

Shares of Lockheed opened down nearly 4% but rallied to be up 2% as of noon Eastern.

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Steady guidance provides relief

Lockheed, the world's largest pure-play defense contractor, has been flying into turbulence of late. The company lost out to Boeing in a competition to build the Air Force's next fighter jet, a multibillion-dollar opportunity for the winner. And last week, right before its earnings announcement, Lockheed said its chief financial officer was stepping down.

But the actual results gave no indication of any trouble. Lockheed earned $7.28 per share on revenue of $18 billion in the quarter, surpassing Wall Street's $6.31 per share on $17.8 billion estimate.

Revenue beat thanks to strong performance from Lockheed's missile and aerospace units, while profitability was boosted with better-than-expected operating margins from its space division.

As importantly, Lockheed Martin held firm to its full-year earnings and cash projections. Investors had been worried that a combination of tariffs and the loss of the fighter contract might lead to some caution on guidance.

Is Lockheed Martin a buy?

Lockheed Martin is in a period of transition, focused mostly on getting the most it can out of existing programs including the F-35 while awaiting the next big thing. The company's relatively poor 0.8 book-to-bill, a measure of new business booked compared to existing work billed in the quarter, reflects the lack of momentum from here.

The good news for investors is that the next big thing is out there. Lockheed has significant exposure to a range of Pentagon priorities from aviation to missile defense to hypersonics. And the company offers a dividend currently yielding nearly 3% for those who are patient.

For those looking for a reliable source of income and the potential for modest growth, Lockheed Martin could be an intriguing choice.

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Lou Whiteman has positions in Lockheed Martin. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.