Lockheed Martin(US:LMT) Hua Er Jie Jian Wen·2025-07-23 01:25Core Viewpoint - Lockheed Martin, the world's largest defense contractor, faced a significant decline in quarterly profits due to a $1.6 billion unexpected expense, raising serious concerns about its project management capabilities and future profitability [1][3]. Financial Performance - In Q2, Lockheed Martin reported a net profit of $342 million, a nearly 80% drop from $1.64 billion in the same period last year, translating to earnings per share of $1.46 compared to $6.85 previously [1]. - The company revised its full-year earnings per share guidance down from a maximum of $27.30 to a range of $21.70 to $22, exacerbating market pessimism [1]. Project Issues - The $1.6 billion pre-tax expense was primarily attributed to severe issues in a classified project within the aerospace division, which accounted for $950 million of the total [3]. - Additionally, Lockheed Martin incurred a loss of $57 million related to a Canadian government helicopter procurement project [3]. Cash Flow Concerns - The company reported a negative free cash flow of $150 million in Q2, raising alarms about its operational challenges [4]. - Analysts expressed concerns that the significant cash flow shortfall indicates deeper operational issues, with one comparing the situation to a "cockroach nest," suggesting that more problems may emerge [4]. Management Challenges - Lockheed Martin is currently facing multiple challenges, including the recent departure of its CFO to competitor Boeing and losing a contract for the U.S. Air Force's next-generation stealth fighter to Boeing [5]. - Despite increased military spending due to conflicts in Ukraine and the Middle East, defense contractors are grappling with rising inflation and other cost pressures [5].