Sign in
LM

LOCKHEED MARTIN CORP (LMT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was operationally mixed: sales were $18.62B (down 1% YoY on a 13-week quarter vs 14 weeks in Q4’23, but up QoQ), EPS was $2.22 including $1.7B pre-tax losses on classified programs (after-tax ~$5.45/share impact); backlog hit a record $176.0B .
  • Management framed the classified charges as deliberate “derisking,” with 2025 set for mid-single-digit sales growth (4–5%), segment margins returning to ~11%, and double-digit FCF/share growth; EPS guided to $27.00–$27.30 with a pension (FAS/CAS) headwind and higher interest expense .
  • F‑35 execution improved: 62 aircraft delivered in Q4 and 110 for FY (top of range), with 2025 deliveries estimated at 170–190; TR‑3 capability progressing with additional releases slated in 2025 .
  • Munitions/home air defense remain core demand engines (GMLRS, JASSM/LRASM, PAC‑3) with strong orders; leadership highlighted fixed‑price discipline and opportunities from DoD acquisition reforms and multiyear contracting .

What Went Well and What Went Wrong

  • What Went Well

    • F‑35 momentum and cash cadence: 62 jets in Q4 (110 in FY); 2025 deliveries guided 170–190 with TR‑3 milestones, supporting working capital improvement in 2025 ($300–$400M benefit) .
    • Robust demand and orders: Q4 orders >$29B (book‑to‑bill ~1.6), aiding record $176.0B backlog; MFC ramps (GMLRS, LRASM, JASSM, PAC‑3) continue into 2025 .
    • Strategic “derisking” sets 2025 up: charges taken now to reduce future risks; 2025 outlook calls for ~11% segment margins and 4–5% sales growth with FCF rising to $6.6–$6.8B .
    • Quote: “Recording charges in Q4 on these two programs enabled us to derisk the financial profile… going forward as we move into their next phases.” — CEO .

  • What Went Wrong

    • Classified program losses: $1.7B pre‑tax in Q4 ($1.3B after tax, $5.45/share), concentrated in MFC ($1.3B) and Aeronautics (~$410M), swinging consolidated margins lower .
    • Segment margin compression: MFC Q4 margin fell to (23.6%) on the classified loss; Aeronautics margin down to 5.4% on loss recognition and lower profit adjustments .
    • YoY sales decline on fewer weeks: 13‑week Q4 vs 14 weeks last year reduced sales; Q4 CFO and FCF were also pressured by a $990M pension contribution .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($B)$18.874 $17.104 $18.622
Diluted EPS ($)$7.58 $6.80 $2.22
Consolidated Operating Margin (%)12.1% 12.5% 3.7%
Cash from Operations ($B)$2.365 $2.438 $1.023
Free Cash Flow ($B)$1.661 $2.083 $0.441
Backlog ($B, end of period)$160.567 $165.693 $176.040

Notes:

  • Q4’24 included 13 weeks vs 14 in Q4’23 (unfavorable sales impact) .
  • Q4’24 EPS includes ~$5.45/share after-tax impact from classified losses .
  • On an adjusted basis, management indicated Q4 segment operating profit would have been ~$2.1B with ~11.1% segment margins (non‑GAAP) .

Segment breakdown (sales and margins):

SegmentQ4 2023 Sales ($B)Q4 2024 Sales ($B)Q4 2023 Op MarginQ4 2024 Op Margin
Aeronautics$7.613 $8.009 10.0% 5.4%
Missiles & Fire Control$3.171 $3.412 12.5% (23.6%)
Rotary & Mission Systems$4.711 $4.261 12.3% 12.0%
Space$3.379 $2.940 9.1% 9.6%

Key KPIs:

KPIQ4 2023Q4 2024FY 2024
F‑35 Deliveries (units)18 62 110
Book‑to‑Bill (approx.)—~1.6 >1.0 (backlog record)
Cash returned to shareholders ($B)——$6.8 (dividends + buybacks)

Estimates vs Actuals (S&P Global):

MetricQ4 2024 ActualConsensus (S&P Global)Surprise
Revenue ($B)$18.622 N/AN/A
Diluted EPS ($)$2.22 N/AN/A
Note: Consensus could not be retrieved due to an S&P Global API rate limit at the time of analysis.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025—~$73.75–$74.75B New
Business Segment Operating Profit (non‑GAAP)FY 2025—~$8.1–$8.2B New
Total FAS/CAS Pension AdjustmentFY 2025—~$1.125B New
Diluted EPSFY 2025—~$27.00–$27.30 New
Cash from OperationsFY 2025—~$8.5–$8.7B New
Capital ExpendituresFY 2025—~$1.9B New
Free Cash Flow (non‑GAAP)FY 2025—~$6.6–$6.8B New
Segment Margins (Consolidated)FY 2025—Return to ~11% (mgmt commentary) New
MFC Sales GrowthFY 2025—~8% growth at midpoint (mgmt) New
Quarterly DividendQ1 2025$3.30 (Q4’24) $3.30 declared Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
AI/autonomy & digitalQ2: TR‑3 delivery and AI augmentation in Aegis; digital investments . Q3: demos of AI teaming with drones/UGVs; adaptive flight control; CCA optionality .Live Skunk Works demos: F‑35 sharing classified data via 5G.Mil; autonomy platform demo with Navy/GA; partnerships (NVIDIA, Meta, IBM, Verizon, Microsoft, Intel) .Broadening use‑cases; moving from demos to integration readiness.
Supply chain/throughputQ2: WC improvements across portfolio . Q3: positive but paced by discrete issues .Approaching/exceeding pre‑COVID in places; discrete bottlenecks persist (e.g., CH‑53K); 2025 still paced in areas .Gradual improvement; still gating some ramps.
F‑35 TR‑3 and deliveriesQ2: 75–110 deliveries targeted; TR‑3 foundation . Q3: 48 deliveries; lot 18–19 funding delays deferred revenue; TR‑3 95% core validated .62 deliveries in Q4; 110 in FY; 2025 deliveries 170–190; TR‑3 milestones continue in 2025; withholds unwind over 2025–2026 .Execution improving; cash cadence normalizing through 2026.
Munitions/air defense demandQ3: strong orders (GMLRS, PAC‑3, LRASM/JASSM); SRM 3rd source with GD .MFC to lead 2025 growth (8%); capacity/ multiyears; PAC‑3 to 650+/yr; targets for GMLRS, Javelin, HIMARS .Sustained multi‑year growth underpinning mid‑single digit company growth.
DoD contracting/regulatoryQ3: CR through year‑end; multiyear and reforms supportive .Fixed‑price discipline emphasized; DoD reforms seen as opportunity; multiyear expansion beyond munitions could accelerate backlog .Favorable policy stance for volume/visibility; disciplined bidding.
Working capital/FCF per shareQ3: WCap efficiency; FCF ~$2.1B .Cash conversion mid‑30s days; 2025 implies ~1‑day improvement; F‑35 withholds release $300–$400M; FCF midpoint $6.7B .Targeted incremental gains; FCF/share growth.
Homeland defense (NGI/Counter‑UAS)—NGI integral to homeland defense; multi‑layer (hypersonics, cruise, counter‑UAS, lasers) driven by AI/high‑speed data .Strategic portfolio alignment.

Management Commentary

  • “Recording charges in Q4 on these two programs enabled us to derisk the financial profile… going forward as we move into their next phases.” — CEO .
  • “We anticipate sales growth of 4% to 5%… operating margins returned to 11% and free cash flow grows 9%… despite noncash FAS pension headwind lowering EPS.” — CFO .
  • “We are fully committed to developing a combined air power solution… using wingman drones, AI, advanced sensors in space and in the air, and 5G‑level, cyber‑hardened data links.” — CEO .
  • “We recorded over $29 billion of orders in the fourth quarter for a book‑to‑bill of approximately 1.6.” — CFO .
  • “We delivered 62 [F‑35] aircraft in the quarter… estimate 170 to 190 F‑35 aircraft deliveries in 2025. TR‑3 capabilities continue to progress.” — CEO .

Q&A Highlights

  • Derisking sufficiency: Management believes Aeronautics classified risk is “significantly reduced” after comprehensive review, added monitoring, and resourcing; multiyear growth framework intact .
  • Fixed‑price risk: Company will strictly apply risk‑adjusted ROI discipline; customer recognition that immature tech shouldn’t be fixed‑price mitigates risk .
  • MFC 2025 outlook: ~8% sales growth; underlying margin construct ~14% ex classified loss; multiyear JASSM/LRASM and PAC‑3 ramps in focus .
  • Working capital/FCF bridge: 2025 benefits from higher F‑35 deliveries and withhold releases (~$300–$400M); ~1 day WCap improvement implied .
  • F‑35 TR‑3/withholds: Additional capability releases expected through 2025; full combat capability timing rests with customer; Lot 19 definitization targeted 2H 2025 (~$10B) .

Estimates Context

  • We attempted to pull S&P Global (Capital IQ) consensus for Q4 2024 revenue and EPS, but the request was blocked by an S&P Global API rate‑limit at the time of analysis; therefore, we cannot state consensus or quantify beats/misses for this quarter.

Key Takeaways for Investors

  • The large classified charges are backward‑looking and intended to derisk; 2025 guide calls for ~11% segment margins and FCF ~$6.6–$6.8B, with mid‑single‑digit topline growth led by MFC .
  • F‑35 delivery cadence (170–190 in 2025) and TR‑3 progression should release withholds and improve cash, supporting FCF growth and working capital days reduction .
  • Munitions/air defense demand (GMLRS, JASSM/LRASM, PAC‑3) plus potential multiyear expansion beyond munitions underpin multi‑year growth and backlog conversion .
  • Contracting discipline (risk‑adjusted ROI) and DoD reform tailwinds mitigate fixed‑price exposure and could enhance backlog/visibility, a positive re‑rating catalyst if execution holds .
  • RMS and Space showed resilience; watch CH‑53K and Next Gen OPIR/program mix as discrete supply constraints ease .
  • Dividend sustained at $3.30/quarter; company returned $6.8B to shareholders in 2024 while investing ~$3.3B in R&D/capex .
  • Near‑term trading: sentiment hinges on confidence in derisking sufficiency and early 2025 execution (Lot 18 definitization, TR‑3 milestones, MFC ramp); medium‑term thesis rests on sustained munitions demand, F‑35 cash normalization, and policy‑driven multiyear awards .

Sources: Company 8‑K/Q4 press release, Q4 earnings call, and prior quarter materials as cited.