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LOCKHEED MARTIN CORP (LMT)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $18.61B and diluted EPS was $6.95, both above consensus ($18.53B revenue*, $6.35 EPS*) driven by F‑35 production/sustainment and munitions ramps; consolidated operating margin rebounded to 12.3% after Q2 charges .
  • Record backlog reached $179.1B, supported by multi‑year awards (PAC‑3 MSE ~$9.8B, JASSM/LRASM ~$9.5B, CH‑53K ~$10.9B) and post‑quarter F‑35 Lots 18–19 definitization; free cash flow was strong at $3.35B .
  • FY25 guidance raised: Sales ~$74.25–$74.75B (midpoint +$0.25B), EPS ~$22.15–$22.35 (raised), Segment OP ~$6.675–$6.725B (raised); cash from operations clarified to ~$8.5B; dividend increased 5% to $3.45 and buyback authorization lifted by $2B to ~$9.1B .
  • Stock reaction catalysts: a “clean” quarter post‑Q2 charges, FY25 guide up, visibility from marquee awards, and narrative momentum around “Golden Dome for America” and space‑based interceptors (prototype demo targeted by 2028) .

Note: Consensus values marked with * are from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Backlog hit an all‑time high of $179.1B, with multi‑year awards underpinning long‑term growth; CEO: “Our record $179 billion backlog…underpins our company’s long‑term growth prospects” .
  • Munitions and air/missile defense strength: PAC‑3 MSE production award ~$9.8B, JASSM/LRASM ~$9.5B; management emphasized elevated demand and capacity investments .
  • Cash generation and capital returns: Q3 free cash flow $3.35B, returned ~$1.8B to shareholders; board raised dividend to $3.45 (+5%) and increased repurchase authorization to ~$9.1B .

What Went Wrong

  • RMS outlook reduction for FY25 due to slower Sikorsky production ramps; Q3 RMS sales flat YoY, though mix helped profit; CFO flagged near‑term scaling pressure .
  • Aeronautics operating margin declined YoY to 9.4% on lower profit booking rate adjustments and $40M unfavorable C‑130 adjustments; classified program remains a monitored risk despite remediation .
  • Pension items and tax dynamics add complexity: effective tax rate 16.5% and plans to pre‑fund part of 2026 pension could create year‑over‑year FCF headwinds in 2027 (offset by operational cash growth) .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$17.963 $18.155 $18.609
Diluted EPS ($)$7.28 $1.46 $6.95
Consolidated Operating Margin (%)13.2% 4.1% 12.3%
Cash from Operations ($USD Billions)$1.409 $0.201 $3.728
Free Cash Flow ($USD Billions)$0.955 $(0.150) $3.347

Segment breakdown (Q3 2024 → Q3 2025):

SegmentQ3 2024 Sales ($B)Q3 2025 Sales ($B)Q3 2024 Op Profit ($M)Q3 2025 Op Profit ($M)Q3 2025 Op Margin (%)
Aeronautics$6.487 $7.256 $659 $682 9.4%
Missiles & Fire Control$3.175 $3.624 $456 $510 14.1%
Rotary & Mission Systems$4.367 $4.373 $483 $506 11.6%
Space$3.075 $3.356 $272 $331 9.9%

KPIs

KPIQ3 2024Q3 2025
F‑35 Deliveries (units)48 46
Backlog ($USD Billions)$176.04 (Dec 31, 2024) $179.07 (Sept 28, 2025)
Shareholder Returns (Quarter)—$1.8B returned (dividends + buybacks)

Guidance Changes

MetricPeriodPrevious Guidance (July 2025)Current Guidance (Oct 21, 2025)Change
Sales ($B)FY 2025~$73.75–$74.75 ~$74.25–$74.75 Raised (midpoint +$0.25B)
Business Segment Operating Profit (non‑GAAP) ($B)FY 2025~$6.60–$6.70 ~$6.675–$6.725 Raised
Total FAS/CAS Pension Adjustment ($B)FY 2025~$1.125 ~$1.125 Maintained
Diluted EPS ($)FY 2025~$21.70–$22.00 ~$22.15–$22.35 Raised
Cash from Operations ($B)FY 2025~$8.5–$8.7 ~$8.5 Tightened (midpoint maintained)
Capital Expenditures ($B)FY 2025~$1.9 ~$1.9 Maintained
Free Cash Flow (non‑GAAP) ($B)FY 2025~$6.6–$6.8 ~$6.6 Tightened (midpoint maintained)
Dividend per Share ($)Q4 2025$3.30 prior$3.45 Raised (+5%)
Share Repurchase Authorization ($B)Ongoing~$7.1 prior~$9.1 Raised (+$2B)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Demand/BacklogBacklog $173.0B in Q1; $166.5B in Q2 after program charges Record backlog $179.1B; >$31B Q3 orders; book‑to‑bill ~1.7 Rising
Program Execution/ChargesQ2: $1.6B program losses (Aeronautics classified, CMHP, TUHP) “Clean” quarter; margins “good”; risks addressed with top talent; continued monitoring Improving
F‑35 Production & SustainmentQ1 ramp; Q2 delivered 50 jets; sustainment momentum Q3 delivered 46 jets; Lots 18–19 definitized; $15B sustainment contract; 175–190 2025 deliveries targeted Expanding
Munitions & Air/Missile DefenseQ1: JASSM/LRASM/PRSM ramps ; Q2 MFC +11% PAC‑3 MSE ~$9.8B; JASSM/LRASM ~$9.5B multi‑year awards Accelerating
Golden Dome & Homeland DefenseQ2: positioned as integrator Prototype environment; open C2; space‑based interceptors demo targeted by 2028 Becoming central
Supply Chain CapacityQ2: scaling across munitions 3 SRM suppliers (NOC, AJRD, GD JV); improved confidence in scaling Improving
Pension/FCF PlanningQ1 FCF $955M; Q2 FCF −$150M with working capital drivers Q3 FCF $3.35B; plan to pre‑fund 2026 pension; 2027 FCF Y/Y headwind offset by ops Stronger near‑term; planned offset longer‑term

Management Commentary

  • CEO: “Our record $179 billion backlog—more than two and a half years of sales—underscores the trust our customers place in us and underpins our company’s long‑term growth prospects…we finalized the contracts covering Lots 18 and 19 of the F‑35 early in the fourth quarter.”
  • CFO: “We are updating our outlook…tightening the sales guidance range to $74.25–$74.75B…EPS to $22.15–$22.35…free cash flow estimate for 2025 is $6.6B” .
  • CEO on strategic posture: “Lockheed Martin is in the aerospace and defense industry, but in the deterrence business…scaling development and production of essential elements—air defense radars and missiles, space‑based interceptors, open‑architecture C2, advanced fighter aircraft” .
  • R&D posture: corporate‑level IRAD funding for operational prototypes (Space‑Based Interceptor, Autonomous Black Hawk, 6th‑gen tech insertion into F‑35/F‑22) to “demonstrate real capability, leapfrogs” .

Q&A Highlights

  • Margin/charges: Management emphasized a “clean quarter,” intent to “put every risk we can quantify behind us,” and intensive resourcing on the Aeronautics classified program; legacy helicopter program risks addressed, though technical risk remains .
  • RMS guide: FY25 RMS lowered mainly due to CH‑53K scaling; plan to scale production through 2026; pilot‑optional Black Hawk autonomy concept gaining customer traction .
  • Supply chain: Increased confidence in solid rocket motors (NOC, AJRD, GD JV) and critical components; close customer coordination to scale and build resiliency .
  • F‑35: Backlog support for 156/year rate; sustainment is key growth driver; margin opportunity as Lot 19 moves to firm fixed price and TR‑3 challenges abate; Block IV collaboration across primes improving .
  • Pension/FCF: Plan to pre‑fund portion of 2026 pension with 2025 FCF; expect 2027 pension cash neutral (recoveries ~ contributions), with any headwind offset by operational cash .
  • Golden Dome: Opportunity sizable but depends on final architecture/budget allocation; LMT well‑positioned across radars, missiles, space assets, and C2 .

Estimates Context

  • Q3 2025 results vs consensus: Revenue $18.61B vs $18.53B*; EPS $6.95 vs $6.35* — both beats .
  • Prior quarters: Q1 beat on both revenue ($17.96B vs $17.80B*) and EPS ($7.28 vs $6.32*); Q2 missed consensus on revenue ($18.16B vs $18.56B*) and EPS ($1.46 vs $6.47*) due to $1.6B program losses .
MetricQ1 2025Q2 2025Q3 2025
Revenue Actual ($B)$17.963 $18.155 $18.609
Revenue Consensus Mean ($B)*$17.801*$18.559*$18.526*
EPS Actual ($)$7.28 $1.46 $6.95
EPS Consensus Mean ($)*$6.323*$6.465*$6.350*
EBITDA Actual ($B)*$2.676*$1.104*$2.604*
EBITDA Consensus Mean ($B)*$2.502*$2.577*$2.597*

Values marked with * retrieved from S&P Global.

Where estimates may adjust:

  • FY25 EPS guidance raised to $22.15–$22.35 vs current FY25 EPS consensus $22.36*; expect modest upward bias to EPS estimates post Q3 beat and tax rate favorability .
  • Sales midpoint raised; MFC strength and F‑35 sustainment visibility support revenue estimate stability to upside; RMS ramp remains a near‑term watch item .

Key Takeaways for Investors

  • Q3 was a reset and rebound quarter: strong revenue/EPS beat, margin recovery, and robust cash generation — positive for sentiment post‑Q2 charges .
  • Multi‑year awards and F‑35 Lots 18–19 create multi‑year visibility; backlog at $179B is a powerful anchor for mid‑single‑digit top‑line growth into 2026+ .
  • Watch RMS execution (CH‑53K) and Aeronautics classified program progress; management actions and disclosure suggest risk containment, but technical risk persists .
  • Capital returns remain attractive: 23rd consecutive dividend increase to $3.45 and ~$9.1B buyback authorization provide yield and optionality, supported by FCF .
  • Strategic narrative: “Golden Dome” and space‑based interceptors elevate LMT’s integrator role; corporate IRAD prototypes could catalyze future awards (trading catalyst as architecture solidifies) .
  • Near‑term trading: Q3 beat and raised guide are supportive; medium‑term thesis rests on munitions capacity expansion, F‑35 sustainment growth, and C2/space franchises (monitor supply chain and budget trajectory) .
  • Non‑GAAP note: Business segment operating profit and free cash flow are non‑GAAP measures used by management; pension adjustments/tax dynamics can affect reported EPS and margins, so track both GAAP and non‑GAAP trends .