10-QPeriod: Q2 FY2023

LOCKHEED MARTIN CORP Quarterly Report for Q2 Ended Jun 25, 2023

Filed July 19, 2023For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported a solid second quarter and first half of 2023, demonstrating revenue growth and improved profitability compared to the prior year. Net sales for the quarter increased by 8% to $16.7 billion, driven primarily by growth in the Aeronautics segment, with notable contributions from the F-35 program and classified contracts. Net earnings saw a significant increase to $1.7 billion ($6.63 per diluted share) from $309 million ($1.16 per diluted share) in the same quarter last year, largely due to the absence of a significant pension settlement charge experienced in 2022 and strong operational performance. The company's financial health remains robust, with operating cash flow of $2.7 billion for the first six months and a healthy backlog of $158 billion, providing visibility for future revenue. Lockheed Martin also continued its commitment to shareholder returns, repurchasing $1.3 billion of its stock and paying substantial dividends. The geopolitical landscape, particularly global security tensions, continues to drive demand for LMT's products and services, with management actively working to scale production and supply chains to meet this demand.

Financial Highlights

46 data points
Beta

Revenue

$16.69B

12.5% Gross Margin

Net Income

$1.68B

10.1% Net Margin

EPS (Diluted)

$6.63

Total Assets

$56.98B

Cash & Equivalents

$3.67B

Free Cash Flow

$1.10B

Financial Statements
Beta
Revenue$16.69B
Cost of Revenue$14.60B
Gross Profit$2.09B
Operating Income$2.13B
Interest Expense$223.00M
Net Income$1.68B
EPS (Basic)$6.65
EPS (Diluted)$6.63
Shares Outstanding (Basic)252.80M
Shares Outstanding (Diluted)253.60M

Key Highlights

  • 1Total net sales for Q2 2023 increased by 8% to $16.7 billion, and for the first six months by 4% to $31.8 billion, year-over-year.
  • 2Net earnings for Q2 2023 surged to $1.7 billion ($6.63 per diluted share), a significant improvement from $309 million ($1.16 per diluted share) in Q2 2022, largely due to the absence of a large pension settlement charge in the prior year.
  • 3Operating profit for the quarter rose by 9% to $2.1 billion, reflecting increased sales and operational efficiencies.
  • 4Aeronautics segment led revenue growth, with net sales up 17% in the quarter, driven by higher volume on F-35 production and sustainment contracts.
  • 5The company generated $2.66 billion in net cash from operating activities for the first six months of 2023, with a free cash flow of $2.04 billion.
  • 6Backlog remains strong at $158 billion, providing significant revenue visibility for future periods.
  • 7Lockheed Martin returned substantial capital to shareholders, repurchasing $1.3 billion in stock and paying $1.5 billion in dividends during the first six months of 2023.

Frequently Asked Questions

The substantial increase in net earnings from $309 million in Q2 2022 to $1.7 billion in Q2 2023 was primarily driven by the absence of a significant non-cash, non-operating pension settlement charge of $1.5 billion ($1.2 billion after-tax) that was recognized in the second quarter of 2022. Stronger sales performance across segments also contributed positively.

Lockheed Martin is actively working to minimize supply chain challenges, including performance and shortages. They are also focused on increasing operational efficiency and improving cost competitiveness to offset inflationary pressures on labor and supplier costs. While inflation has not significantly impacted Q2 2023 results, the company acknowledges the potential for increased costs on existing fixed-price contracts.

The F-35 program continues to be a significant revenue driver, with strong international demand and increasing orders from countries like Canada and South Korea. The company delivered 45 aircraft in Q2 2023 and expects to deliver between 100-120 aircraft in 2023. Challenges remain regarding software maturation (TR-3 configuration), and potential delays could impact profitability, but the company anticipates full recovery of delayed deliveries in 2024.

Lockheed Martin maintains a balanced cash deployment strategy. They are investing in the business through capital expenditures and R&D, returning capital to shareholders via share repurchases (with $8.8 billion remaining authorization) and dividends, and managing debt levels. Operating cash flow remains strong, providing ample liquidity.