Lockheed Martin(LMT) - 2025 Q2 - Quarterly Results

Lockheed Martin Q2 2025 Financial Performance This section provides an overview of Lockheed Martin's financial results for Q2 2025, highlighting significant program losses and their impact on earnings and cash flow Q2 2025 Financial Highlights Lockheed Martin's Q2 2025 results show stable sales but a sharp decline in net earnings and cash flow due to nearly $1.8 billion in program losses Q2 2025 vs Q2 2024 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $18.2 billion | $18.1 billion | | Net Earnings | $342 million | $1.6 billion | | Diluted EPS | $1.46 | $6.85 | | Cash from Operations | $201 million | $1.9 billion | | Free Cash Flow | $(150) million | $1.5 billion | - The company recorded pre-tax program losses of $1.6 billion and other charges of $169 million, which collectively reduced earnings per share by $5.83[6] - Despite the poor results, the company returned $1.3 billion in cash to shareholders through dividends and share repurchases during the quarter[6] - The company reaffirmed its 2025 guidance for both sales and free cash flow[6] Program Losses and Other Charges The company recorded $1.615 billion in pre-tax program losses in Q2 2025, primarily from classified Aeronautics, CMHP, and TUHP programs Impact of Program Losses and Other Charges (Q2 2025, in millions) | Item | Impact | | :--- | :--- | | Aeronautics classified program loss | $(950) | | CMHP program loss | $(570) | | TUHP program loss | $(95) | | Business segment operating profit impact | $(1,615) | | Fixed asset write-off | $(66) | | Consolidated operating profit impact | $(1,600) | | Net earnings impact | $(1,367) | | Diluted EPS impact | $(5.83) | - Aeronautics experienced ongoing design, integration, and test challenges on a classified program, leading to a comprehensive review and a $950 million pre-tax loss[8] - Discussions with customers on the Canadian Maritime Helicopter Program (CMHP) and Türkish Utility Helicopter Program (TUHP) led to revised cost and sales estimates, resulting in pre-tax losses of $570 million and $95 million, respectively[9][10] - Other charges included a $66 million write-off of fixed assets following the U.S. Air Force's NGAD down-select decision and a $103 million charge for uncertain tax positions[11] Consolidated Financial Results Consolidated sales remained flat at $18.2 billion, but operating profit and cash from operations significantly declined due to program losses and working capital changes Summary Financial Results (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | $18,155 | $18,122 | $36,118 | $35,317 | | Consolidated operating profit | $748 | $2,148 | $3,120 | $4,177 | | Net earnings | $342 | $1,641 | $2,054 | $3,186 | | Diluted earnings per share | $1.46 | $6.85 | $8.75 | $13.24 | | Cash from operations | $201 | $1,876 | $1,610 | $3,511 | | Free cash flow | $(150) | $1,506 | $805 | $2,763 | - The decrease in cash from operations was driven by an increase in working capital, specifically from production and invoice timing on the F-35 program, higher contract assets, increased Sikorsky inventory, and billing cycles in space programs[17] - Key cash activities in Q2 2025 included paying $771 million in dividends and repurchasing $500 million of shares[18] 2025 Financial Outlook Lockheed Martin significantly lowered its 2025 profitability guidance due to Q2 charges, while maintaining sales and free cash flow forecasts 2025 Financial Outlook Update (in millions, except per share data) | Metric | Current Update | April 2025 Outlook | | :--- | :--- | :--- | | Sales | ~$73,750 - $74,750 | ~$73,750 - $74,750 | | Business segment operating profit | ~$6,600 - $6,700 | ~$8,100 - $8,200 | | Diluted earnings per share | ~$21.70 - $22.00 | ~$27.00 - $27.30 | | Cash from operations | ~$8,500 - $8,700 | ~$8,500 - $8,700 | | Free cash flow | ~$6,600 - $6,800 | ~$6,600 - $6,800 | - The outlook for Business Segment Operating Profit was lowered from ~$8.1 billion-$8.2 billion to ~$6.6 billion-$6.7 billion[20] - Diluted EPS guidance was reduced from ~$27.00-$27.30 to ~$21.70-$22.00[20] Segment Results This section details the financial performance of Lockheed Martin's individual business segments, highlighting the impact of program losses Aeronautics Aeronautics sales increased 2% to $7.4 billion, but the segment reported an operating loss of $98 million due to a $950 million classified contract loss Aeronautics Q2 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $7,420 | $7,277 | +2% | | Operating (loss) profit | $(98) | $751 | -113% | | Operating margin | (1.3%) | 10.3% | -11.6 pts | - The sales increase was primarily due to $470 million in higher volume on F-35 production contracts, partially offset by a $360 million unfavorable sales adjustment from the classified program loss[26] - The operating profit decrease of $849 million was attributable to the $950 million loss on the classified contract, which was partially offset by a $90 million increase on the F-35 program[27] Missiles and Fire Control (MFC) MFC sales grew 11% to $3.4 billion, with operating profit up 6%, driven by increased production of tactical and strike missile programs MFC Q2 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $3,433 | $3,102 | +11% | | Operating profit | $479 | $450 | +6% | | Operating margin | 14.0% | 14.5% | -0.5 pts | - Sales increased by $331 million (11%), primarily due to a $330 million increase from the production ramp-up on JASSM, LRASM, and precision fires programs[29] - Operating profit increased by $29 million (6%), reflecting a $35 million gain from the production ramp-up and a $25 million gain from favorable contract mix, partially offset by a $25 million decrease in profit booking rate adjustments, mainly on PAC-3[30] Rotary and Mission Systems (RMS) RMS sales decreased 12% to $4.0 billion, resulting in an operating loss of $172 million, primarily due to $665 million in CMHP and TUHP program losses RMS Q2 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $3,995 | $4,548 | -12% | | Operating (loss) profit | $(172) | $495 | -135% | | Operating margin | (4.3%) | 10.9% | -15.2 pts | - Sales decreased by $553 million (12%), mainly due to $370 million in unfavorable cumulative adjustments from losses on the CMHP and TUHP programs[32] - Operating profit decreased by $667 million (135%), primarily due to a $570 million loss on CMHP and a $95 million loss on TUHP[33] Space Space segment sales increased 4% to $3.3 billion, with operating profit up 5%, driven by commercial civil space and strategic missile defense programs Space Q2 Performance (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales | $3,307 | $3,195 | +4% | | Operating profit | $362 | $346 | +5% | | Operating margin | 10.9% | 10.8% | +0.1 pts | - Sales increased by $112 million (4%), driven by higher volume on the Orion program ($115 million) and strategic missile defense programs like NGI and FBM ($80 million)[34] - Operating profit increased by $16 million (5%), primarily due to a $20 million increase in profit booking rate adjustments from favorable performance on commercial civil space programs[35] Supplementary Information and Financial Statements This section provides additional financial details, including income tax rates, non-GAAP measures, consolidated financial statements, and backlog information Income Taxes The effective income tax rate for Q2 2025 increased to 18.0% due to higher interest expense on an uncertain tax position - The effective tax rate was 18.0% in Q2 2025, compared to 15.8% in Q2 2024[36] - The increase in the tax rate was primarily due to higher interest expense on the company's uncertain tax position[36] Use of Non-GAAP Financial Measures The report uses non-GAAP measures like "business segment operating profit" and "free cash flow" to provide supplemental insights into performance and liquidity - The company uses non-GAAP financial measures such as business segment operating profit and free cash flow, which it believes are useful for evaluating financial performance[37] - Business segment operating profit represents operating profit before unallocated income and expense and is used by senior management to evaluate segment performance[38] - Free cash flow is defined as cash from operations less capital expenditures and is used to evaluate business performance, overall liquidity, and the amount of cash available for return to stockholders and creditors[40] Consolidated Financial Statements The consolidated financial statements reflect the severe impact of program losses on Q2 profitability, with significant changes in working capital affecting cash flow Consolidated Statements of Earnings Q2 2025 Statement of Earnings shows flat sales but a sharp decline in gross and net earnings due to $1.6 billion in program losses Q2 2025 Consolidated Statement of Earnings (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $18,155 | $18,122 | | Gross profit | $734 | $2,130 | | Operating profit | $748 | $2,148 | | Earnings before income taxes | $417 | $1,948 | | Net earnings | $342 | $1,641 | Consolidated Balance Sheets As of June 29, 2025, total assets increased to $58.9 billion and total liabilities to $53.5 billion, driven by changes in contract assets, receivables, and payables Consolidated Balance Sheet Highlights (in millions) | Account | June 29, 2025 | Dec. 31, 2024 | | :--- | :--- | :--- | | Total current assets | $23,988 | $21,849 | | Total assets | $58,870 | $55,617 | | Total current liabilities | $24,354 | $19,420 | | Total liabilities | $53,536 | $49,284 | | Total stockholders' equity | $5,334 | $6,333 | Consolidated Statements of Cash Flows Net cash from operating activities significantly decreased to $1.6 billion for the first six months of 2025, primarily due to increased working capital Six Months Ended Cash Flow Summary (in millions) | Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,610 | $3,511 | | Net cash (used for) investing activities | $(1,145) | $(744) | | Net cash (used for) financing activities | $(1,655) | $(1,686) | | Net change in cash and cash equivalents | $(1,190) | $1,081 | Other Financial and Operating Information Total backlog decreased to $166.5 billion as of June 29, 2025, with key Q2 aircraft deliveries including 50 F-35s Backlog by Segment (in millions) | Segment | June 29, 2025 | Dec. 31, 2024 | | :--- | :--- | :--- | | Aeronautics | $52,165 | $62,763 | | Missiles and Fire Control | $40,250 | $38,783 | | Rotary and Mission Systems | $38,584 | $38,117 | | Space | $35,531 | $36,377 | | Total backlog | $166,530 | $176,040 | Q2 2025 Aircraft Deliveries | Aircraft | Deliveries | | :--- | :--- | | F-35 | 50 | | F-16 | 3 | | C-130J | 1 |