Lockheed Martin Corp (NYSE:LMT) has been downgraded by Bank of America analysts after the White House overlooked it for the US Air Force’s Next Generation Air Dominance Program, instead selecting Boeing.
The analysts downgraded the stock to ‘Neutral’ from ‘Buy’ and lowered their price objective to $485 from $685.
Lockheed Martin shares pulled back about 7% on Friday following the announcement and fell another 2% to about $430 on Monday.
Bank of America expects Lockheed Martin shares to remain rangebound in the wake of last week’s announcement.
“We had placed significantly higher odds on Lockheed Martin winning the program, as did most industry watchers and investors,” they wrote.
The decision capped off a rough month for the company, analysts added.
Lockheed Martin's future
Lockheed Martin is no longer competing for the Navy's sixth generation FA-XX program. “This begs the question as to what Lockheed Martin's future is as a Prime Contractor in a 6th gen fighter world if they are not leading the development of any of the manned 6th gen program,” analysts wrote.
They added that, while they expect defense budgets will increase, they remain cautions about Lockheed Martin’s recent quality of earnings, the loss of all 6th Gen manned tactical aircraft programs and lack of company-specific catalysts in the near-term.
“As a result, we are downgrading Lockheed Martin,” they wrote. “We are lowering our topline growth expectations as well as delaying our profitability ramp up at Aeronautics.”