10-QPeriod: Q2 FY2019

LOCKHEED MARTIN CORP Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 23, 2019For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported strong financial results for the second quarter and first six months of 2019, demonstrating robust top-line growth and improved profitability. Net sales increased by 8% to $14.4 billion for the quarter and 15% to $28.8 billion for the first six months, driven by higher product sales across its key segments, particularly Aeronautics, Missiles and Fire Control (MFC), and Space. Net earnings saw a significant uplift, reaching $1.4 billion ($5.00 diluted EPS) for the quarter and $3.1 billion ($11.00 diluted EPS) for the six months, up from $1.2 billion ($4.05 diluted EPS) and $2.3 billion ($8.07 diluted EPS) respectively in the prior year periods. This performance was bolstered by increased production volumes, favorable contract performance, and a lower effective income tax rate. The company also maintained a strong cash flow from operations and reaffirmed its positive 2019 financial outlook.

Financial Highlights

45 data points
Beta

Revenue

$14.43B

13.8% Gross Margin

Net Income

$1.42B

9.8% Net Margin

EPS (Diluted)

$5.00

Total Assets

$47.84B

Cash & Equivalents

$1.17B

Free Cash Flow

$1.67B

Financial Statements
Beta
Revenue$14.43B
Cost of Revenue$12.43B
Gross Profit$1.99B
Operating Income$2.01B
Interest Expense$163.00M
Net Income$1.42B
EPS (Basic)$5.03
EPS (Diluted)$5.00
Shares Outstanding (Basic)282.20M
Shares Outstanding (Diluted)283.90M

Key Highlights

  • 1Net sales increased by 7.7% to $14.4 billion in Q2 2019 and by 14.9% to $28.8 billion in H1 2019, year-over-year.
  • 2Net earnings rose to $1.42 billion ($5.00 diluted EPS) in Q2 2019 and $3.12 billion ($11.00 diluted EPS) in H1 2019, reflecting strong operational performance.
  • 3Product sales showed significant growth, up 7.7% for the quarter and 14.9% for the six months, driven by key programs like the F-35 (Aeronautics), missile programs (MFC), and satellite programs (Space).
  • 4Service sales also increased by 7.8% for the quarter and 16.3% for the six months, primarily from Rotary and Mission Systems (RMS) and MFC.
  • 5Operating profit for the consolidated entity increased to $2.01 billion in Q2 2019 from $1.80 billion in Q2 2018, and to $4.29 billion in H1 2019 from $3.52 billion in H1 2018.
  • 6The company generated strong net cash provided by operating activities of $3.33 billion in H1 2019, a substantial increase from $0.56 billion in H1 2018.
  • 7Lockheed Martin reaffirmed its 2019 financial outlook, expecting net sales to increase in the low-double digit percentage range from 2018 levels.

Frequently Asked Questions

Lockheed Martin's revenue growth in Q2 2019 was primarily driven by increased product sales across its Aeronautics, Missiles and Fire Control (MFC), and Space segments. Specific drivers included higher production volume for the F-35 program in Aeronautics, increased volume for tactical and strike missile programs in MFC, and higher volume for government satellite programs in Space. Service sales also contributed positively, particularly from RMS and MFC.

Lockheed Martin's profitability improved significantly. Net earnings for the second quarter of 2019 were $1.42 billion, up from $1.16 billion in the same period of 2018. Diluted earnings per share rose to $5.00 from $4.05. For the first six months, net earnings increased to $3.12 billion from $2.32 billion, with diluted EPS growing to $11.00 from $8.07. This improvement was attributed to higher sales volumes, favorable contract performance, and a lower effective income tax rate.

Lockheed Martin reaffirmed its 2019 financial outlook, expecting net sales to increase in the low-double digit percentage range compared to 2018. This growth is anticipated to be driven by increased production and sustainment on major programs and higher volumes across its business segments. Key factors influencing this outlook include continued U.S. Government support and funding for its programs. However, the company noted potential impacts from U.S. Government actions related to Turkey, budget uncertainties, and program-specific challenges.

Lockheed Martin generated strong operating cash flow, amounting to $3.33 billion in the first six months of 2019, a significant increase from the prior year. This strong cash flow supports its balanced deployment strategy, which includes investing in the business (capital expenditures, R&D), returning cash to stockholders through dividends and share repurchases, and managing debt. The company has $2.5 billion remaining under its share repurchase program authorization as of June 30, 2019.