10-QPeriod: Q2 FY2021

LOCKHEED MARTIN CORP Quarterly Report for Q2 Ended Jun 27, 2021

Filed July 26, 2021For Securities:LMT

Summary

Lockheed Martin Corporation's (LMT) second-quarter 2021 report (filed July 26, 2021) shows a solid increase in net sales and net earnings compared to the same period in the prior year. Total net sales grew by 5% to $17.0 billion for the quarter and 4% to $33.3 billion for the first six months, driven by growth across all segments, particularly in Space and Rotary and Mission Systems. Net earnings also saw a healthy increase, rising to $1.8 billion ($6.52 per diluted share) for the quarter and $3.7 billion ($13.08 per diluted share) for the six months, up from $1.6 billion and $3.3 billion respectively in the prior year. While the company reported a significant loss of $225 million on a classified program in the Aeronautics segment, this was partially offset by gains in other areas and the overall positive sales and earnings performance. The company is proceeding with its planned acquisition of Aerojet Rocketdyne, currently expected to close in Q4 2021, subject to regulatory approval. The company also reaffirmed its 2021 financial outlook, expecting mid-single digit sales growth and maintaining its operating profit margin target, though it acknowledges ongoing uncertainties related to COVID-19 and U.S. government funding. Investors should note the continued strong performance in core segments, healthy cash generation, and commitment to returning capital through dividends and share repurchases. However, the ongoing risks associated with government contracts, potential program performance issues, and the significant Aerojet Rocketdyne acquisition warrant close monitoring.

Financial Highlights

46 data points
Beta

Revenue

$17.03B

12.6% Gross Margin

Net Income

$1.81B

10.7% Net Margin

EPS (Diluted)

$6.52

Total Assets

$52.10B

Cash & Equivalents

$2.75B

Free Cash Flow

$1.27B

Financial Statements
Beta
Revenue$17.03B
Cost of Revenue$14.88B
Gross Profit$2.15B
Operating Income$2.19B
Interest Expense$142.00M
Net Income$1.81B
EPS (Basic)$6.54
EPS (Diluted)$6.52
Shares Outstanding (Basic)277.40M
Shares Outstanding (Diluted)278.40M

Key Highlights

  • 1Total net sales increased 5% to $17.0 billion for the quarter and 4% to $33.3 billion for the six months ended June 27, 2021, compared to the prior year periods.
  • 2Net earnings increased to $1.8 billion ($6.52 per diluted share) for the quarter and $3.7 billion ($13.08 per diluted share) for the six months, demonstrating improved profitability.
  • 3The company reported a $225 million loss on a classified program in the Aeronautics segment, impacting profitability for the quarter.
  • 4Lockheed Martin is on track with its planned acquisition of Aerojet Rocketdyne, with an expected closing in the fourth quarter of 2021, pending regulatory approvals.
  • 5Net cash provided by operating activities was $3.0 billion for the six months, though this was a decrease from the $4.5 billion generated in the same period last year, primarily due to working capital changes.
  • 6The company continued to return capital to shareholders, paying $1.5 billion in dividends and repurchasing $1.5 billion in stock during the six months ended June 27, 2021.
  • 7Backlog remained strong at $141.7 billion as of June 27, 2021, indicating significant future revenue potential.

Frequently Asked Questions

The primary driver for the increase in net sales was higher product sales across most segments, including significant contributions from Space (AWE program, Next Gen OPIR, hypersonics), Missiles and Fire Control (tactical and strike missile programs), Rotary and Mission Systems (Sikorsky helicopter programs), and Aeronautics (F-35 program). Service sales also contributed to the growth, particularly in RMS.

The company recognized a $225 million loss ($169 million after-tax, or $0.61 per diluted share) in the Aeronautics segment related to performance issues on a classified program during the second quarter of 2021. This loss negatively impacted operating profit and net earnings for the period.

Lockheed Martin is proceeding with the acquisition of Aerojet Rocketdyne, having entered into an agreement in December 2020. The transaction is expected to close in the fourth quarter of 2021, subject to regulatory approvals, including a 'second request' from the Federal Trade Commission.

Net cash provided by operating activities for the first six months of 2021 was $3.0 billion, a decrease of $1.5 billion compared to $4.5 billion in the same period of 2020. This decrease was primarily due to higher growth in working capital and increased tax payments, partially offset by higher net earnings.