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Lockheed Martin(LMT) - 2024 Q3 - Earnings Call Transcript
LMTLockheed Martin(LMT)2024-10-22 19:18
Financials

Financial Data and Key Metrics Changes - Sales for Q3 2024 were 17.1billion,up117.1 billion, up 1% year-over-year, with a normalized growth of 5% when accounting for delayed revenue recognition of approximately 700 million related to the F-35 program [12][4] - Segment operating profit increased by 3% year-over-year to 1.9billion,withconsolidatedmarginsat10.91.9 billion, with consolidated margins at 10.9% [12][4] - Free cash flow was 2.1 billion for the quarter, contributing to a year-to-date total of over 4.8billion[13][4]−GAAPearningspershareroseto4.8 billion [13][4] - GAAP earnings per share rose to 6.80, reflecting a 1% increase year-over-year [12] Business Line Data and Key Metrics Changes - Aeronautics sales decreased by 3% year-over-year, primarily due to lower F-35 volume, while C-130 and F-16 programs partially offset this decline [17] - Missiles & Fire Control (MFC) saw an 8% increase in sales year-over-year, driven by production ramps in precision fires programs [19] - Rotary & Mission Systems (RMS) sales increased by 6% to 4.4billion,primarilyduetohighervolumeinintegratedwarfaresystemsandSikorskyprograms[20]−Spacesegmentsalesdecreasedslightlyyear−over−year,butoperatingprofitincreasedby54.4 billion, primarily due to higher volume in integrated warfare systems and Sikorsky programs [20] - Space segment sales decreased slightly year-over-year, but operating profit increased by 5% due to a favorable mix [21] Market Data and Key Metrics Changes - The company ended Q3 with a record backlog of over 165 billion, reflecting a book-to-bill ratio of 1.3 [4][13] - MFC's book-to-bill ratio was a strong 2.7, contributing to a record backlog exceeding 40billion[19]CompanyStrategyandDevelopmentDirection−Thecompanyisinvestingheavilyinautonomy,AI,anddigitaltechnologiestoenhancecapabilitiesacrossitsplatforms,includingtheF−35[6][7]−AteamingagreementwithGeneralDynamicswassignedfortheproductionofsolidrocketmotors,aimedatincreasingproductioncapacityandstrengtheningthedefensesupplychain[8]−ThecompanyisexpandinginternationalcollaborationstodevelopindigenousmilitarycapabilitiesincountrieslikeAustralia,Germany,Poland,andIndia[9]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceinfuturecashgenerationprospects,leadingtoa540 billion [19] Company Strategy and Development Direction - The company is investing heavily in autonomy, AI, and digital technologies to enhance capabilities across its platforms, including the F-35 [6][7] - A teaming agreement with General Dynamics was signed for the production of solid rocket motors, aimed at increasing production capacity and strengthening the defense supply chain [8] - The company is expanding international collaborations to develop indigenous military capabilities in countries like Australia, Germany, Poland, and India [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future cash generation prospects, leading to a 5% increase in the quarterly dividend and an extension of share repurchase authorization [4] - The company anticipates sales growth of approximately 5% for 2024, with segment operating profit expected to reach approximately 7.475 billion [23] - Management highlighted the importance of maintaining production momentum despite ongoing negotiations for F-35 Lot 18 and 19 contracts [58] Other Important Information - The company delivered 48 F-35 aircraft in Q3 and expects to deliver between 90 to 110 aircraft in 2024 [5] - The U.S. defense budget is currently under a continuing resolution, which will fund government operations through December 20, 2024 [9] Q&A Session Summary Question: Current situation in tactical fighter world and NGAD - Management is preserving optionality based on U.S. government strategy for tactical fighter deployment and is investing in technologies for sixth-generation aircraft [30][32] Question: Ranking of segments for medium-term growth - MFC is expected to lead growth with high-single-digit growth, while other segments will see low-single-digit growth [36][37] Question: MFC margin performance - Year-to-date performance in MFC is better than the prior year, with a good quarter showing 14.4% margins [40][41] Question: Update on CCA and ARRW classified contract - The company is investing heavily in autonomy and AI for CCA, while the ARRW program has seen incremental risk and losses [45][47] Question: F-35 Lot 18 and 19 negotiations and cash implications - The company is managing the complexities of F-35 production and negotiations, emphasizing the importance of industry and government collaboration [58][63]