Lockheed Martin(LMT) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Highlights Lockheed Martin reported strong Q1 2024 financial results with increased net sales and free cash flow, supported by a substantial backlog and reaffirmed full-year outlook, despite a slight decrease in net earnings Q1 2024 Key Financial Metrics Lockheed Martin's Q1 2024 saw increased net sales and stable cash flow, despite a decline in net earnings, with the quarter comprising 13 weeks Q1 2024 vs Q1 2023 Financial Performance | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $17.2 billion | $15.1 billion | | Net Earnings | $1.5 billion | $1.7 billion | | Diluted EPS | $6.39 | $6.61 | | Cash from Operations | $1.6 billion | $1.6 billion | | Free Cash Flow | $1.3 billion | $1.3 billion | - The company returned $1.8 billion to shareholders through $780 million in dividends and $1.0 billion in share repurchases[1][14] - The total backlog at the end of the quarter was $159 billion, bolstered by significant National Security Space awards[3] - The first quarter of 2024 comprised 13 weeks, compared to 12 weeks for the first quarter of 2023[1] Adjusted (Non-GAAP) Financial Results Non-GAAP adjusted net earnings for Q1 2024 decreased to $1.53 billion, or $6.33 per diluted share, compared to the prior year Reconciliation of GAAP to Non-GAAP Earnings | (in millions, except per share data) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | As Reported Diluted EPS (GAAP) | $6.39 | $6.61 | | Mark-to-market investment gains | ($0.06) | ($0.18) | | As Adjusted Diluted EPS (Non-GAAP) | $6.33 | $6.43 | 2024 Financial Outlook Lockheed Martin reaffirmed its full-year 2024 financial outlook, projecting net sales, diluted earnings per share, and free cash flow within specified ranges Full-Year 2024 Financial Outlook | Metric | 2024 Outlook | | :--- | :--- | | Net Sales | $68,500 - $70,000 million | | Business Segment Operating Profit | $7,175 - $7,375 million | | Diluted Earnings Per Share | $25.65 - $26.35 | | Free Cash Flow | $6,000 - $6,300 million | - The financial outlook assumes no significant reduction in customer budgets, continued program funding, and a statutory tax rate of 21%[12] Cash Flow and Capital Deployment Q1 2024 cash from operations and free cash flow remained stable, with significant capital deployment through dividends, share repurchases, and a new debt issuance - Free cash flow in Q1 2024 was $1.3 billion, resulting from $1.6 billion in cash from operations minus $378 million in capital expenditures[14] - Key capital deployment activities in Q1 2024 included: - Paying cash dividends of $780 million - Repurchasing 2.3 million shares for $1.0 billion - Receiving net proceeds of $2.0 billion from a new debt issuance[14] Segment Results All four business segments reported Q1 2024 net sales growth and increased total operating profit, despite a decline in Missiles and Fire Control due to a classified program loss Aeronautics Aeronautics' Q1 2024 net sales grew 9% driven by F-35 and F-16 programs, with operating profit remaining comparable despite F-35 cost adjustments Aeronautics Q1 Performance | (in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $6,845 | $6,269 | | Operating Profit | $679 | $675 | | Operating Margin | 9.9% | 10.8% | - Net sales increase was primarily driven by higher volume on the F-35 program (+$305M), classified programs (+$155M), and the F-16 program (+$60M)[23] - Operating profit on the F-35 program decreased by $30 million due to lower net profit adjustments from higher material costs[24] Missiles and Fire Control (MFC) MFC's Q1 2024 net sales surged 25% due to missile program ramp-ups, but operating profit declined significantly from a classified program loss MFC Q1 Performance | (in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $2,993 | $2,388 | | Operating Profit | $311 | $377 | | Operating Margin | 10.4% | 15.8% | - Sales growth was driven by a $460 million increase in tactical and strike missile programs (GMLRS, HIMARS, JASSM) and a $100 million increase in integrated air and missile defense programs (PAC-3, THAAD)[26] - Operating profit decreased significantly due to a $100 million reach-forward loss on a classified program option[27] Rotary and Mission Systems (RMS) RMS Q1 2024 net sales increased 16% driven by IWSS and helicopter programs, with operating profit growing 23% from higher volume and favorable adjustments RMS Q1 Performance | (in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $4,088 | $3,510 | | Operating Profit | $430 | $350 | | Operating Margin | 10.5% | 10.0% | - Sales growth was led by IWSS programs (+$295M), C6ISR programs (+$150M), and Sikorsky helicopter programs (+$100M)[29] - Operating profit increased by $80 million, with $40 million from IWSS programs due to higher volume and a favorable profit rate adjustment after retiring technical risk on a radar program[30] Space Space segment net sales grew 10% in Q1 2024 from strategic and national security programs, with operating profit increasing 16% due to ULA joint venture equity earnings Space Q1 Performance | (in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $3,269 | $2,959 | | Operating Profit | $325 | $280 | | Operating Margin | 9.9% | 9.5% | - Sales growth was driven by strategic and missile defense programs (+$140M) and national security space programs (+$115M)[32] - Operating profit growth was primarily attributable to a $45 million positive swing in equity earnings from the ULA investment, which reported $15 million in earnings in Q1 2024 versus a $15 million loss in Q1 2023[33][34] Other Financial Information This section details the effective tax rate and defines non-GAAP financial measures used to evaluate underlying business performance Income Taxes The effective income tax rate for Q1 2024 was 15.8%, slightly higher than Q1 2023, benefiting from various tax credits and deductions - The effective tax rate was 15.8% in Q1 2024 and 15.3% in Q1 2023[36] - Tax rates in both periods benefited from R&D tax credits, deductions for foreign derived intangible income, and dividends paid to the company's defined contribution plans[36] Use of Non-GAAP Financial Measures Lockheed Martin utilizes non-GAAP financial measures like business segment operating profit and free cash flow to supplement GAAP and aid performance evaluation - Business segment operating profit is used by senior management to evaluate the performance of its business segments[38] - Free cash flow (cash from operations less capital expenditures) is used to evaluate business performance, overall liquidity, and is a performance goal in incentive plans[40] - Adjusted earnings and EPS are presented to help investors understand underlying business performance by excluding certain non-operational items[42] Supplementary Information This section provides supplementary information, including forward-looking statements, detailed unaudited financial statements, and other operating data like segment backlog and aircraft deliveries Forward-Looking Statements The company's forward-looking statements are subject to risks and uncertainties, including reliance on U.S. Government contracts, budget uncertainty, and supply chain viability - Key risks include: reliance on U.S. Government contracts, budget uncertainty, F-35 program risks, supplier performance, inflation, and cyber threats[47][49] Consolidated Financial Statements Unaudited consolidated financial statements provide detailed Q1 2024 figures for earnings, balance sheets, and cash flows, reflecting key financial positions and activities Consolidated Statement of Earnings (Q1 2024 vs Q1 2023) | (in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $17,195 | $15,126 | | Gross Profit | $1,993 | $2,046 | | Operating Profit | $2,029 | $2,037 | | Net Earnings | $1,545 | $1,689 | Consolidated Balance Sheet Summary | (in millions) | March 31, 2024 | Dec. 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $22,958 | $20,521 | | Total Assets | $54,963 | $52,456 | | Total Current Liabilities | $17,699 | $16,937 | | Total Liabilities | $48,313 | $45,621 | | Total Stockholders' Equity | $6,650 | $6,835 | Consolidated Statement of Cash Flows (Q1 2024 vs Q1 2023) | (in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,635 | $1,564 | | Net cash used for investing activities | ($372) | ($259) | | Net cash provided by (used for) financing activities | $85 | ($1,412) | Other Financial and Operating Information Total company backlog slightly decreased in Q1 2024, with segment-specific changes, and aircraft deliveries included F-16s and C-130Js but no F-35s Backlog by Segment (in millions) | Segment | March 31, 2024 | Dec. 31, 2023 | | :--- | :--- | :--- | | Aeronautics | $57,035 | $60,156 | | Missiles and Fire Control | $31,297 | $32,229 | | Rotary and Mission Systems | $38,030 | $37,726 | | Space | $33,006 | $30,456 | | Total Backlog | $159,368 | $160,567 | Aircraft Deliveries | Aircraft | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | F-35 | 0 | 5 | | F-16 | 3 | 1 | | C-130J | 4 | 2 |