10-QPeriod: Q1 FY2018

LOCKHEED MARTIN CORP Quarterly Report for Q1 Ended Mar 25, 2018

Filed April 25, 2018For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported strong financial performance for the first quarter of 2018, with total net sales increasing by 3.8% to $11.6 billion compared to the same period in the prior year. This growth was driven by an increase in service sales, up 17%, and a more modest 2% rise in product sales. Net earnings saw a significant jump of 46.6%, reaching $1.16 billion, translating to diluted earnings per share of $4.02, a substantial improvement from $2.69 in Q1 2017. This robust earnings growth was partly attributed to lower income tax expense due to the provisional impact of the Tax Cuts and Jobs Act of 2017. The company's operating profit also saw a healthy increase of 23.2% to $1.7 billion. This improvement was bolstered by strong performance across most segments, particularly Rotary and Mission Systems (RMS), which saw a significant operating profit increase driven by the absence of a large charge recorded in the prior year and favorable cost performance. Management anticipates continued growth in net sales and operating profit for the full year 2018, supported by increased production and sustainment volumes on key programs and improved performance in certain segments. Investors should note the company's continued commitment to returning capital to shareholders, with significant dividend payments and share repurchases.

Financial Highlights

45 data points
Beta

Revenue

$11.63B

14.3% Gross Margin

Net Income

$1.16B

9.9% Net Margin

EPS (Diluted)

$4.02

Total Assets

$46.63B

Cash & Equivalents

$2.39B

Free Cash Flow

$632.00M

Financial Statements
Beta
Revenue$11.63B
Cost of Revenue$9.98B
Gross Profit$1.66B
Operating Income$1.73B
Interest Expense$155.00M
Net Income$1.16B
EPS (Basic)$4.05
EPS (Diluted)$4.02
Shares Outstanding (Basic)285.50M
Shares Outstanding (Diluted)287.90M

Key Highlights

  • 1Total net sales increased by 3.8% to $11.635 billion in Q1 2018 compared to Q1 2017.
  • 2Net earnings surged by 46.6% to $1.157 billion, with diluted EPS growing from $2.69 to $4.02.
  • 3Operating profit rose by 23.2% to $1.725 billion.
  • 4Service sales experienced a strong increase of 17% year-over-year.
  • 5The company paid $586 million in dividends and repurchased $300 million of its stock in Q1 2018.
  • 6Adoption of new accounting standards (ASC 606 and ASU 2017-07) has been reflected in all presented periods.
  • 7The Aeronautics segment remains the largest contributor to net sales, driven by the F-35 program.

Frequently Asked Questions

The primary driver for the increase in net sales was a 17% rise in service sales, contributing significantly to the overall 3.8% growth in total net sales to $11.6 billion. Product sales also saw a modest 2% increase.

Lockheed Martin adopted ASC 606 (Revenue from Contracts with Customers) and ASU 2017-07 (Compensation-Retirement Benefits) effective January 1, 2018. These changes have been applied retrospectively to all periods presented. ASC 606 primarily affects revenue recognition for contracts, and ASU 2017-07 altered the presentation of pension and postretirement benefit plan expenses. The company has adjusted prior periods to reflect these changes, noting specific impacts on revenue recognition and expense classification.

Lockheed Martin expects net sales to increase in the low-single digit range for the full year 2018 compared to 2017. Segment operating profit is projected to increase in the mid-single digit range, with an expectation of improved operating profit margins over 2017 levels.

Net sales increased in Aeronautics (+7%) and Missiles and Fire Control (+8%), while decreasing slightly in Space (-3%). Rotary and Mission Systems (RMS) saw a 3% net sales increase. Operating profit saw significant growth in RMS (+143%) driven by prior-year charges not recurring, and increases in MFC (+12%) and Aeronautics (+8%). Space experienced a decrease in operating profit (-9%).