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LOCKHEED MARTIN CORP (LMT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered clean beats: sales $18.0B (+4% YoY), diluted EPS $7.28 (+14% YoY), with consolidated operating margin up 140 bps to 13.2% and free cash flow $0.96B; management reaffirmed full‑year 2025 guidance despite tariff/NGAD uncertainties .
  • Versus S&P Global consensus, LMT beat on EPS ($7.28 vs $6.32*) and revenue ($18.0B vs $17.80B*), and exceeded EBITDA ($2.68B vs $2.50B*), driven by ~$480M net profit booking rate adjustments across segments and strong MFC/RMS execution . Values retrieved from S&P Global*.
  • Management highlighted multi‑year growth drivers: missile awards (JASSM/LRASM, PRSM, THAAD), Trident II D5 life extension, and the emerging “Golden Dome” homeland air/missile defense initiative; backlog stood at ~$173B (~2+ years of sales) .
  • Strategic pivot post‑NGAD: LMT will not protest; instead intends to migrate NGAD‑developed technologies onto F‑35/F‑22, targeting “80% of sixth‑gen capability at 50% of cost,” and accelerate AI/digital integration (e.g., Google Cloud collaboration) .
  • Near‑term catalysts: Lot 18 definitization expected to unlock working capital and cash, missiles production ramps (path to 1,100 JASSM/LRASM units in 2027), tariff mitigation mechanisms under fixed‑price clauses, and Golden Dome architecture opportunities .

What Went Well and What Went Wrong

What Went Well

  • MFC strength: Sales +13% YoY to $3.37B, OP +50% YoY; margin expanded to 13.8%, helped by production ramp and favorable profit booking rate adjustments (absence of prior year classified loss) .
  • RMS execution: Sales +6% YoY to $4.33B, OP +21% YoY; margin 12.0% on CSC radar/IWSS volume, Sikorsky Black Hawk production, and $50M IP license benefit .
  • Strategic awards/backlog: Missiles awards (PRSM, THAAD, JASSM/LRASM) and Trident II D5 LE underpin long‑cycle visibility; backlog ~$173B (~2+ years of sales) . Quote: “advanced air and missile systems… comprising up to $10 billion of future work” .

What Went Wrong

  • Space top‑line: Sales down 2% YoY on National Security Space lifecycle (Next Gen OPIR, Transport Layer), partly offset by favorable commercial civil performance; ULA equity earnings declined on fewer launches .
  • Cash dynamics softer YoY: CFO $1.41B (vs $1.64B), FCF $0.96B (vs $1.26B), impacted by milestone timing increasing contract assets, higher insurance, and employee accrual payments; software spend elevated .
  • Q4 2024 context warns of volatility: Prior quarter had large classified program losses (Aero/MFC) depressing EPS/margins; though Q1 normalized, it highlights sensitivity to booking rate adjustments/program milestones .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Billions)$17.20 $18.62 $18.0
Diluted EPS ($)$6.39 $2.22 $7.28
Net Earnings ($USD Billions)$1.545 $0.527 $1.712
Consolidated Operating Margin (%)11.8% 3.7% 13.2%
Cash from Operations ($USD Billions)$1.635 $1.023 $1.409
Free Cash Flow ($USD Billions)$1.257 $0.441 $0.955

Segment Breakdown

SegmentQ1 2024 Sales ($mm)Q1 2025 Sales ($mm)Q1 2024 OP ($mm)Q1 2025 OP ($mm)Q1 2024 MarginQ1 2025 Margin
Aeronautics$6,845 $7,057 $679 $720 9.9% 10.2%
Missiles & Fire Control$2,993 $3,373 $311 $465 10.4% 13.8%
Rotary & Mission Systems$4,088 $4,328 $430 $521 10.5% 12.0%
Space$3,269 $3,205 $325 $379 9.9% 11.8%

KPIs

KPIDec 31, 2024Mar 30, 2025
Backlog – Aeronautics ($mm)$62,763 $57,476
Backlog – MFC ($mm)$38,783 $40,637
Backlog – RMS ($mm)$38,117 $39,113
Backlog – Space ($mm)$36,377 $35,748
Total Backlog ($mm)$176,040 $172,974
Aircraft Deliveries – F‑35 (units)62 (Q4) 47 (Q1)
Aircraft Deliveries – F‑16 (units)7 (Q4) 4 (Q1)
Aircraft Deliveries – C‑130J (units)8 (Q4) 1 (Q1)
Dividends Paid ($mm)$778 (Q4) $796 (Q1)
Share Repurchases ($mm)$1,000 (Q4) $750 (Q1)

Guidance Changes

MetricPeriodPrevious Guidance (Jan 28, 2025)Current Guidance (Apr 22, 2025)Change
Sales ($mm)FY 2025~$73,750–$74,750 ~$73,750–$74,750 Maintained
Business Segment OP ($mm, non‑GAAP)FY 2025~$8,100–$8,200 ~$8,100–$8,200 Maintained
Total FAS/CAS Pension Adj ($mm)FY 2025~$1,125 ~$1,125 Maintained
Diluted EPS ($)FY 2025~$27.00–$27.30 ~$27.00–$27.30 Maintained
Cash from Operations ($mm)FY 2025~$8,500–$8,700 ~$8,500–$8,700 Maintained
Capex ($mm)FY 2025~$1,900 ~$1,900 Maintained
Free Cash Flow ($mm, non‑GAAP)FY 2025~$6,600–$6,800 ~$6,600–$6,800 Maintained

Note: Guidance excludes evolving tariff effects, NGAD decision impacts, and Executive Orders; assumes programs funded under full‑year Continuing Appropriations and Extensions Act of 2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q‑2: Q3’24)Previous Mentions (Q‑1: Q4’24)Current Period (Q1’25)Trend
F‑35 Lots 18–19 funding/definitizationRevenue/cash impact from lack of authorization; expected resolution Q4’24 Q4 EPS/margins depressed by classified losses; continued focus on production stability Expect Lot 18 definitization in Q2’25 to unlock cash; 170–190 deliveries targeted Improving cash timing
Missiles production ramps (JASSM/LRASM, PAC‑3, THAAD)PAC‑3 favorable adjustments; GMLRS/LRASM ramp Backlog up; missile demand strong ~$2B JASSM/LRASM orders; path to 1,100 units by 2027 Accelerating
Golden Dome (homeland layered defense)Not highlightedNot highlightedDetailed architecture plan (ground/space/C2); rapid RFI cycle; >100 capabilities proposed Emerging major driver
NGAD outcome/strategyAero classified program losses noted Large classified losses in Aero/MFC No protest; pivot to F‑35/F‑22 upgrades using NGAD tech (“80% capability at 50% cost”) Strategic pivot
AI/digital integration21st Century Security narrative; production system resiliency Emphasis on digital/manufacturing technologies Google Cloud gen‑AI collaboration; AI Factory ecosystem Intensifying
Tariffs & supply chainN/AN/AMitigation via cost‑type contracts and FAR clauses; timing lags possible; rare‑earth exposure limited Manageable, timing risk

Management Commentary

  • “These solid first quarter results reinforce confidence in our ability to achieve the full year 2025 financial guidance we laid out in January…” — Jim Taiclet .
  • “We recorded approximately $2 billion in orders for the JASSM/LRASM… supporting the production ramp to 1,100 units in 2027.” — Evan Scott .
  • “We are not going to protest the NGAD decision… applying all the technologies… onto our embedded base of F‑35 and F‑22… 80% of sixth‑gen capability at 50% of the cost.” — Jim Taiclet .
  • “Our expectations for 2025 financial outlook remain unchanged… mid‑single‑digit sales growth, solid 11% margins, and ~$6.7B FCF at midpoint.” — Evan Scott .
  • “Tariff impacts are mitigated in many cases; mechanisms exist to recover impacts under fixed‑price clauses—timing may lag.” — Evan Scott/Maria Ricciardone .

Q&A Highlights

  • NGAD decision: No protest; accelerated plan to retrofit NGAD tech onto F‑35/F‑22 to achieve best‑value capability uplift .
  • Executive orders: Management applauds efforts to reduce red tape, speed FMS and acquisition; expects faster adoption of physical/digital tech across the defense enterprise .
  • Tariffs and rare‑earths: Recovery mechanisms in contracts; timing lag risk; defense supply chain constrained from using Chinese inputs and supported by stockpiles .
  • F‑35 deliveries/cash: 170–190 deliveries expected in 2025; Lot 18 definitization anticipated in Q2 to unlock working capital .
  • Golden Dome: Ground/space/open‑architecture C2 vision; rapid RFI cycle; LMT positioned to network existing systems (PAC‑3/THAAD/radars) with AI/5G/distributed cloud .

Estimates Context

MetricQ1 2025 ConsensusQ1 2025 ActualSurprise
Revenue ($USD Billions)$17.80*$18.0 +$0.20B (Beat)
Primary EPS ($)$6.32*$7.28 +$0.96 (Beat)
EBITDA ($USD Billions)$2.50*$2.68*+$0.18B (Beat)

Values retrieved from S&P Global*. Consensus counts: Revenue (16*), EPS (9*) for Q1 2025. FY 2025 consensus: revenue $74.56B*, EPS $22.36*, vs company guidance EPS ~$27.00–$27.30 and sales ~$73.75–$74.75, implying potential upward pressure on consensus EPS if margins/booking rates sustain . Values retrieved from S&P Global*.

Key Takeaways for Investors

  • Quality beat with margin expansion and broad segment strength; booking rate adjustments (~$480M) amplified profitability but reflect strong program execution at Aero/RMS/Space .
  • Missile franchise momentum and Golden Dome opportunities support multi‑year growth and backlog durability; near‑term ramps in JASSM/LRASM, PAC‑3, THAAD are tangible .
  • Cash generation solid despite working capital timing; Lot 18 definitization expected to unlock cash in Q2, reducing contract asset build .
  • Strategic pivot post‑NGAD reduces binary risk; focus on F‑35/F‑22 upgrades and AI/digital integration (Google Cloud) can drive cost‑effective capability and international appeal .
  • Tariff exposure manageable via contract structures; monitor timing of recoveries and potential short‑term cash lags rather than structural margin impact .
  • Watch Space mix: National Security Space lifecycle pressure persists, but margins benefited from favorable commercial civil performance; ULA cadence affects equity earnings .
  • Tactical setup: Reaffirmed FY25 guide, backlog visibility, and missile awards provide support; estimate revisions likely skew positive for near‑term quarters given Q1 beats and cash unlocks ahead .
Citations:
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