What is the primary reason for the decrease in net earnings and earnings per share?

The decrease in net earnings and earnings per share for the first quarter of 2026 compared to the prior year is primarily due to unfavorable profit booking rate adjustments on several programs, most notably a $125 million adjustment on a classified Aeronautics program stemming from production performance and development delays. Other program-specific challenges and lower overall operating profit also contributed to the decline.

Why did operating cash flow and free cash flow decrease so significantly?

Operating cash flow saw a substantial decrease mainly due to working capital timing, particularly the timing of billing activities. This, combined with higher capital expenditures and software development costs, led to a significant decline in free cash flow, which turned negative in the first quarter of 2026. This suggests challenges in converting earnings into cash during the period.

What are the key risks highlighted in the report regarding ongoing programs?

The report highlights significant cumulative losses and ongoing performance issues on several major programs. These include a classified Aeronautics program with approximately $1.8 billion in cumulative losses, an MFC classified program with approximately $1.46 billion in cumulative losses, and the Canadian Maritime Helicopter Program with approximately $670 million in cumulative losses. The company acknowledges the potential for further losses on these programs if estimates change or performance issues persist.

How are supply chain issues and inflation impacting Lockheed Martin?

Lockheed Martin continues to experience supply chain challenges, including supplier shortages and performance issues, as well as inflationary pressures. While the company is working to mitigate these impacts, they present risks to future profits, margins, and cash flows, especially for existing fixed-price contracts. The company is focused on increasing operational efficiency and improving cost competitiveness to offset these pressures.

LMT 10-Q Quarterly Report Q1 FY2026 — Revenue, Net Income, EPS

Summary

Lockheed Martin Corporation's first-quarter 2026 results show a slight increase in total sales to $18.02 billion, up from $17.96 billion in the prior year period, driven by growth in its Missiles and Fire Control and Space segments. However, net earnings saw a decline to $1.49 billion, or $6.44 per diluted share, compared to $1.71 billion, or $7.28 per diluted share, in the first quarter of 2025. This decrease is primarily attributed to a significant unfavorable profit booking rate adjustment of $125 million on a classified Aeronautics program due to production performance and development delays, alongside other program-specific challenges. The company experienced a substantial decrease in cash provided by operating activities, falling to $220 million from $1.41 billion year-over-year, largely due to working capital timing. This led to negative free cash flow of $291 million for the quarter, a significant drop from the $955 million generated in the prior year. While total sales saw modest growth, the decline in profitability and operating cash flow are key concerns for investors. The company continues to navigate a complex global security environment and supply chain challenges, while also facing program-specific issues that impact financial performance.

Financial Highlights

45 data points

Beta

Revenue

$18.02B

0.1% Gross Margin

Net Income

$1.49B

0.1% Net Margin

EPS (Diluted)

$6.44

Total Assets

$59.24B

Cash & Equivalents

$1.89B

Free Cash Flow

$220.00M

Financial Statements

Beta

Revenue	$18.02B
Cost of Revenue	$15.94B
Gross Profit	$2.08B
Operating Income	$2.06B
Net Income	$1.49B
EPS (Basic)	$6.47
EPS (Diluted)	$6.44
Shares Outstanding (Basic)	229.90M
Shares Outstanding (Diluted)	231.10M

Key Highlights

1Total sales increased slightly to $18.02 billion in Q1 2026 from $17.96 billion in Q1 2025.
2Net earnings decreased to $1.49 billion ($6.44 EPS) in Q1 2026 from $1.71 billion ($7.28 EPS) in Q1 2025.
3Operating profit declined to $2.06 billion in Q1 2026 from $2.37 billion in Q1 2025.
4Net cash provided by operating activities significantly decreased to $220 million from $1.41 billion.
5Free cash flow turned negative at $(291) million in Q1 2026, compared to $955 million in Q1 2025.
6Aeronautics segment faced a $101 million decrease in operating profit due to unfavorable profit booking rate adjustments, particularly on a classified program.
7Significant cumulative losses remain on several key programs, including a classified Aeronautics program ($1.8 billion), an MFC classified program ($1.46 billion), and the Canadian Maritime Helicopter Program ($670 million).

LOCKHEED MARTIN CORP Quarterly Report for Q1 Ended Mar 29, 2026

Summary

Financial Highlights

Key Highlights

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