01—Abstract
Summary
Summary of the 8-K filed January 23, 2024. Cited figures are marked; the original filing is the authoritative source.
Lockheed Martin closed 2023 with net sales of $67.6 billiona, up 2% from $66.0 billion in 2022, and GAAP net earnings of $6.9 billion, or $27.55 per diluted share, versus $21.66 in 2022.
The 2022 comparison was distorted by a $1.5 billionb pension settlement charge, so the 27% EPS increase is largely a base effect; on an adjusted basis (excluding severance, mark-to-market and other non-operational items), 2023 EPS was $27.82 versus $27.23, a modest 2% gain. Fourth-quarter sales were $18.9 billion, flat year over year, and EPS was $7.58 versus $7.40. Segment operating profit declined about 1% for the year to $7.4 billion, with margins compressing in Aeronautics and Missiles and Fire Control, partly offset by growth in Space.
Cash generation and shareholder returns were the strongest parts of the report. Cash from operations was $7.9 billionc and free cash flow was $6.2 billion for 2023, slightly above 2022. The company returned $9.1 billion to shareholders through dividends ($3.1 billion) and buybacks ($6.0 billion).
Backlog reached a record $160.6 billiond, up about 7% year over year, with growth in every segment, which supports revenue visibility. Total debt rose to roughly $17.5 billion after a $2.0 billion issuance, and equity fell sharply to $6.8 billion due to accumulated other comprehensive losses, mainly pension-related. For 2024, management guided to net sales of $68.5–70.0 billion, business segment operating profit of $7.175–7.375 billion, diluted EPS of $25.65–26.35, and free cash flow of $6.0–6.3 billion.
The midpoint EPS guidance implies a decline from 2023's $27.55 GAAP figure, largely reflecting the absence of 2023's favorable non-service pension income and lower expected profit booking rates; management still anticipates top-line growth and a mid-single-digit growth target in free cash flow per share. Investors should watch execution on fixed-price development programs, the ramp of the classified and Space programs, and the sensitivity of results to U.S. budget timing, including continuing resolutions.
02—Key points
Key Highlights
- FY2023 net sales of $67.6B (+2% YoY); Q4 net sales of $18.9B (flat YoY)
- FY2023 GAAP diluted EPS of $27.55 vs. $21.66 in 2022; adjusted EPS of $27.82 vs. $27.23 (+2%), with 2022 depressed by a $1.5B pension settlement charge
- Record backlog of $160.6B, up about 7% YoY, with growth across all four segments
- Free cash flow of $6.2B for FY2023 and $1.7B in Q4; operating cash flow of $7.9B for the year
- Returned $9.1B to shareholders in 2023 ($3.1B dividends, $6.0B buybacks); shares outstanding fell from 254M to 240M
- Segment operating profit declined 1% to $7.4B; Aeronautics and MFC margins compressed while Space operating profit rose 10%
- 2024 guidance: net sales $68.5–70.0B, diluted EPS $25.65–26.35, free cash flow $6.0–6.3B, reflecting lower pension income and a $100M+ mix of profit adjustments
03—Questions
Frequently Asked Questions
Why did reported EPS rise so sharply in 2023?
Most of the increase reflects the comparison with 2022, which included a $1.47 billion pension settlement charge ($4.33 per share after tax). On an adjusted basis, which removes severance, mark-to-market and debt-refinancing items, EPS rose only about 2%, from $27.23 to $27.82.
What is driving the 2024 guidance for lower EPS?
The guided diluted EPS range of $25.65–26.35 sits below 2023's $27.55 GAAP result. The 2023 figure benefited from $443 million of non-service FAS pension income, and the 2024 outlook assumes a smaller benefit. The company also expects profit booking rate adjustments to be less favorable than in 2023, and the outlook excludes future mark-to-market gains or losses.
Is the backlog growth durable, and where is it concentrated?
Total backlog grew to $160.6 billion from $150.0 billion. Aeronautics added about $3.5 billion, MFC about $3.5 billion, RMS about $2.8 billion, and Space about $0.8 billion. Backlog gives multi-year revenue visibility, but it depends on U.S. budget appropriations and timely funding, and the company's guidance explicitly assumes no government shutdown or extended continuing resolution.
What risks did the company flag in the quarter?
The company recorded $92 million of severance and asset impairment charges tied to a workforce reduction intended to improve efficiency, and MFC took a $40 million loss on a classified program in Q4 and $45 million for the full year. Aeronautics margins fell to 10.3% for the year from 10.6%, and the Canadian Maritime Helicopter Program produced a $100 million unfavorable adjustment in Q2 2023. Investors should watch for further fixed-price program charges.
How strong is the balance sheet after the shareholder returns?
Cash fell to $1.4 billion from $2.5 billion, and long-term debt rose to $17.3 billion after a $2.0 billion issuance. Stockholders' equity dropped to $6.8 billion from $9.3 billion, mainly due to a $0.8 billion increase in accumulated other comprehensive loss (pension-related) and heavy buybacks. Free cash flow of $6.2 billion covered dividends of $3.1 billion, but buybacks of $6.0 billion were funded partly by new debt and existing cash.
04—Continue