10-QPeriod: Q3 FY2023

LOCKHEED MARTIN CORP Quarterly Report for Q3 Ended Sep 24, 2023

Filed October 17, 2023For Securities:LMT

Summary

Lockheed Martin Corporation (LMT) reported its third-quarter 2023 financial results, showing a slight increase in net sales to $16.88 billion, up from $16.58 billion in the prior year's quarter, driven by growth in its Rotary and Mission Systems and Space segments. Net earnings for the quarter were $1.68 billion, or $6.73 per diluted share, a marginal decrease from $1.78 billion, or $6.71 per diluted share, in the same period last year. For the nine-month period, net sales rose to $48.7 billion, with net earnings reaching $5.05 billion, a significant increase from $3.82 billion in the same period of 2022, largely benefiting from a substantial increase in earnings before income taxes. The company continues to navigate a complex geopolitical and economic environment, with strong demand for its products and services driven by global security concerns. While supply chain disruptions and inflation present ongoing challenges, Lockheed Martin's robust backlog of $156 billion provides visibility for future revenue. The company demonstrated a strong commitment to shareholder returns, repurchasing $3 billion in common stock and increasing its quarterly dividend. Free cash flow remained strong, indicating effective operational and financial management.

Financial Highlights

46 data points
Beta

Revenue

$16.88B

12.1% Gross Margin

Net Income

$1.68B

10.0% Net Margin

EPS (Diluted)

$6.73

Total Assets

$56.67B

Cash & Equivalents

$3.55B

Free Cash Flow

$2.89B

Financial Statements
Beta
Revenue$16.88B
Cost of Revenue$14.83B
Gross Profit$2.05B
Operating Income$2.04B
Interest Expense$237.00M
Net Income$1.68B
EPS (Basic)$6.75
EPS (Diluted)$6.73
Shares Outstanding (Basic)249.30M
Shares Outstanding (Diluted)250.20M

Key Highlights

  • 1Net sales for the third quarter increased by 1.8% year-over-year to $16.88 billion, driven by growth in Services (up 11%) and moderate increases in Product sales across key segments.
  • 2Net earnings for the quarter slightly decreased to $1.68 billion ($6.73 per diluted share) from $1.78 billion ($6.71 per diluted share) in Q3 2022, impacted by various factors including unfavorable profit adjustments in certain segments.
  • 3Nine-month net earnings saw a significant increase of 32% to $5.05 billion, primarily due to a substantial rise in earnings before income taxes driven by a large positive pension adjustment compared to a significant pension settlement charge in the prior year's period.
  • 4The company generated strong operating cash flow, with $5.56 billion for the nine months ended September 24, 2023, and a free cash flow of $4.57 billion, underscoring its financial stability.
  • 5Lockheed Martin continues to return capital to shareholders, repurchasing $3.0 billion of common stock in the first nine months of 2023 and recently authorizing a further $6.0 billion increase to its share repurchase program.
  • 6The company's backlog remained substantial at $156.0 billion as of September 24, 2023, providing strong revenue visibility for the coming years.

Frequently Asked Questions

Revenue growth in the third quarter was primarily driven by an 11% increase in services sales, particularly in Aeronautics due to higher sustainment contract volumes, and moderate product sales growth in Rotary and Mission Systems (IWSS programs) and Space (strategic and missile defense programs, national security space programs). Rotary and Mission Systems also saw an increase in net sales due to new program ramp-ups.

For the third quarter, net earnings saw a slight decrease to $1.68 billion from $1.78 billion in the prior year, resulting in earnings per diluted share of $6.73 compared to $6.71. This was influenced by various factors including lower profit booking rate adjustments in some segments. However, for the first nine months of the year, net earnings significantly increased to $5.05 billion from $3.82 billion, largely due to a favorable non-service FAS pension adjustment this year compared to a significant pension settlement charge in the prior year.

Lockheed Martin continues to face challenges related to supply chain disruptions, inflation (leading to increased labor and supplier costs), and geopolitical uncertainties. These factors can pressure margins, particularly on existing fixed-price contracts, and impact delivery schedules. The company is also managing program-specific issues, such as delays in the F-35 Technology Refresh 3 (TR-3) software development, which has impacted delivery timelines but is not expected to affect the 2023 financial outlook. Additionally, government budget uncertainties and continuing resolutions can cause delays in new contract awards.

Lockheed Martin demonstrated strong liquidity with $3.6 billion in cash and cash equivalents and generated $5.56 billion in net cash from operating activities for the nine-month period, resulting in $4.57 billion in free cash flow. The company is actively returning value to shareholders through significant share repurchases, having bought back $3.0 billion in stock year-to-date, and has a substantial remaining authorization for future repurchases. They also increased their quarterly dividend by $0.15 per share to $3.15, signaling confidence in their financial position and future prospects.