10-QPeriod: Q3 FY2017

LOCKHEED MARTIN CORP Quarterly Report for Q3 Ended Sep 24, 2017

Filed October 26, 2017For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported its third-quarter 2017 financial results, showing continued revenue growth driven by its core business segments. Total net sales for the quarter increased by approximately 5.3% year-over-year, reaching $12.17 billion. This growth was primarily fueled by a 14% increase in the Aeronautics segment, largely due to higher production volumes on the F-35 program, and a 4% increase in product sales across the company. Despite the top-line growth, net earnings from continuing operations saw a decrease to $939 million ($3.24 per diluted share) from $1.09 billion ($3.61 per diluted share) in the prior-year period. This decline was influenced by various factors, including a significant non-cash gain recognized in the prior year from consolidating the AWE joint venture and a charge related to the EADGE-T program. The company's strong operational cash flow remains a key strength, providing ample resources for investments, dividends, and share repurchases. Management also reiterated its positive outlook for the full year 2017, anticipating increased sales and earnings per share.

Financial Statements
Beta
Revenue$12.34B
Cost of Revenue$10.74B
Gross Profit$1.60B
Operating Income$1.68B
Interest Expense$162.00M
Net Income$963.00M
EPS (Basic)$3.35
EPS (Diluted)$3.32
Shares Outstanding (Basic)287.10M
Shares Outstanding (Diluted)290.00M

Key Highlights

  • 1Total net sales for Q3 2017 increased to $12.17 billion, up 5.3% from $11.55 billion in Q3 2016.
  • 2Aeronautics segment sales grew significantly by 14% to $4.77 billion, driven by increased F-35 program production.
  • 3Net earnings from continuing operations decreased to $939 million ($3.24/share) from $1.09 billion ($3.61/share) in the prior year.
  • 4Operating profit from continuing operations was $1.43 billion, down from $1.59 billion in Q3 2016.
  • 5Net cash provided by operating activities for the nine months ended September 24, 2017, was $4.96 billion, an increase from $4.46 billion in the prior year.
  • 6The company repurchased $1.5 billion of its common stock during the first nine months of 2017 and declared $1.6 billion in dividends.
  • 7The company updated its full-year 2017 outlook, expecting net sales to increase in the mid-single digit percentage range and diluted EPS to be between $12.85 and $13.15.

Frequently Asked Questions

The increase in net sales was primarily driven by higher production and sustainment volumes in the Aeronautics segment, particularly related to the F-35 program. Increased sales volumes in the Missiles and Fire Control (MFC) and Rotary and Mission Systems (RMS) segments also contributed to the overall growth.

Net earnings from continuing operations decreased year-over-year primarily due to a significant non-cash gain recognized in the prior year from the consolidation of the AWE joint venture, which did not recur in the current period. Additionally, a charge related to performance matters on the EADGE-T program in the RMS segment and lower equity earnings from investees impacted profitability.

Lockheed Martin updated its 2017 financial outlook, expecting net sales to increase in the mid-single digit percentage range compared to 2016. Diluted earnings per share are projected to be between $12.85 and $13.15, benefiting from a deferred non-cash gain expected to be recognized in the fourth quarter.

The company continues to generate strong operating cash flow, which funds its operations, capital expenditures, and debt obligations. Lockheed Martin is actively returning value to shareholders through significant share repurchases, with $1.5 billion made in the first nine months of 2017 and an additional $2.0 billion authorized. The company also paid $1.6 billion in dividends during the same period.