Lockheed Martin Reports First Quarter 2024 Financial Results

Lockheed Martin Corporation reported first quarter 2024 net sales of $17.2 billion, compared to $15.1 billion in the first quarter of 2023.

Net earnings in the first quarter of 2024 were $1.5 billion, or $6.39 per share, compared to $1.7 billion or $6.61 per share, in the first quarter of 2023.

Cash from operations was $1.6 billion in both the first quarters of 2024 and 2023. Free cash flow was $1.3 billion in both the first quarters of 2024 and 2023.

First quarter 2024 results included 13 weeks compared to 12 weeks for first quarter 2023.

Adjusted earnings before income taxes, net earnings and diluted EPS

The table below shows the impact to earnings before income taxes, net earnings and diluted earnings per share (EPS) for certain non-operational items:

Summary Financial Results

The following table presents the company’s summary financial results.

2024 Financial Outlook

The following table and other sections of this news release contain forward-looking statements, which are based on the company’s current expectations.

Actual results may differ materially from those projected. It is the company’s practice not to incorporate adjustments into its financial outlook for proposed or potential acquisitions, divestitures, ventures, pension risk transfer transactions, financing transactions, changes in law, or new accounting standards until such items have been consummated, enacted or adopted.

For additional factors that may impact the company’s actual results, refer to the “Forward-Looking Statements” section in this news release.

Cash Flows and Capital Deployment Activities

Cash from operations in the first quarter of 2024 was $1.6 billion and capital expenditures were $378 million, resulting in free cash flow of $1.3 billion.

The operating and free cash flows for the first quarter of 2024 were comparable to the same period in 2023.

The company’s cash activities in the quarter ended March 31, 2024, included the following:

• paying cash dividends of $780 million;
• paying $1.0 billion to repurchase 2.3 million shares; and
• receiving net proceeds of $2 billion from a debt issuance of senior unsecured notes, consisting of $650 million aggregate principal amount of 4.50% Notes due 2029, $600 million aggregate principal amount of 4.80% Notes due 2034 and $750 million aggregate principal amount of 5.20% Notes due 2064.

Segment Results

The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space.

The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.

Net sales and operating profit of the company’s business segments exclude intersegment sales, cost of sales, and profit as these activities are eliminated in consolidation and not included in management’s evaluation of performance of each segment.

Business segment operating profit includes the company’s share of earnings or losses from equity method investees as the operating activities of the equity method investees are closely aligned with the operations of the company’s business segments.

Business segment operating profit excludes the FAS/CAS pension operating adjustment, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government cost accounting standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance such as a portion of management and administration costs, legal fees and settlements, environmental costs, stock-based compensation expense, retiree benefits, significant severance actions, significant asset impairments, gains or losses from divestitures, intangible asset amortization expense, and other miscellaneous corporate activities.

Excluded items are included in the reconciling item “Unallocated items” between operating profit from the company’s business segments and its consolidated operating profit.

Changes in net sales and operating profit generally are expressed in terms of volume, contract mix, and/or performance (referred to as profit adjustments).

Changes in volume refer to increases or decreases in sales or operating profit resulting from varying production activity levels, deliveries or service levels on individual contracts.

Volume changes in segment operating profit are typically based on the current profit booking rate for a particular contract.

Contract mix refers to changes in the ratio of contract type or life cycle (e.g., cost-type, fixed-price, development, production and/or sustainment). 

In addition, comparability of the company’s segment sales, operating profit and operating margin may be impacted favorably or unfavorably by changes in profit booking rates on the company’s contracts.

Increases in profit booking rates, typically referred to as favorable profit adjustments, usually relate to revisions in the estimated total costs to fulfill the performance obligations that reflect improved conditions on a particular contract.

Conversely, conditions on a particular contract may deteriorate, resulting in an increase in the estimated total costs to fulfill the performance obligations and a reduction in the profit booking rate and are typically referred to as unfavorable profit adjustments.

Increases or decreases in profit booking rates are recognized in the period they are determined and reflect the inception-to-date effect of such changes.

The company’s consolidated net favorable profit booking rate adjustments represented approximately 11% and 25% of total segment operating profit in the quarters ended March 31, 2024 and March 26, 2023.

The decrease in the net favorable profit booking rate adjustments was driven by a $100 million reach-forward loss recognized on a classified program at MFC after updating the company’s assessment of the likelihood that the options may be exercised and concluded that an option would be exercised based on progress made on the program and discussions with the customer.

In addition to this reach-forward loss, net favorable profit booking rate adjustments were lower by $120 million, see the discussion below.

Aeronautics 

Aeronautics’ net sales in the first quarter of 2024 increased $576 million, or 9%, compared to the same period in 2023.

The increase was primarily attributable to higher net sales of $305 million on the F-35 program due to higher volume on production, development and sustainment contracts; $155 million on classified programs driven by higher volume; and $60 million on the F-16 program due to the ramp up on production.

Aeronautics’ operating profit in the first quarter of 2024 was comparable to the same period in 2023. Operating profit increased $50 million on the F-16 program as operating profit for the first quarter of 2023 reflects the impact of unfavorable profit adjustments on a production contract and sustainment contracts as a result of schedule delays related to software and technical specification risks that did not recur in the first quarter of 2024.

This increase was partially offset by lower operating profit of $30 million on the F-35 program primarily due to lower net profit adjustments on production contracts as a result of higher than anticipated material costs, partially offset by higher volume described above.

Total net profit booking rate adjustments were $40 million lower in the first quarter of 2024 compared to the same period in 2023.

Missiles and Fire Control

MFC’s net sales in the first quarter of 2024 increased $605 million, or 25% compared to the same period in 2023.

The increase was primarily attributable to higher net sales of $460 million for tactical and strike missile programs due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS), High Mobility Artillery Rocket System (HIMARS), Joint Air-to-Surface Standoff Missile (JASSM) and Long Range Anti-Ship Missile (LRASM) programs; and $100 million for integrated air and missile defense programs primarily due to higher volume on PAC-3 and Terminal High Altitude Area Defense (THAAD).

MFC’s operating profit in the first quarter of 2024 decreased $66 million, or 18%, compared to the same period in 2023.

The decrease was primarily attributable to lower operating profit for tactical and strike missile programs due to a $100 million reach-forward loss recognized for an option on a classified program and an unfavorable profit adjustment on HELLFIRE as a result of additional costs expected to be incurred associated with a contract claim, partially offset by the production ramp up described above.

Total net profit booking rate adjustments, inclusive of the $100 million loss described above, were $120 million lower in the first quarter of 2024 compared to the same period in 2023.

Rotary and Mission Systems

RMS’ net sales in the first quarter of 2024 increased $578 million, or 16% compared to the same period in 2023.

The increase was primarily attributable to higher net sales of $295 million on integrated warfare systems and sensors (IWSS) programs due to new program ramp up within the laser systems portfolio and higher volume on the Aegis and radar programs; $150 million for various C6ISR (command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance) programs due to higher volume; and $100 million for Sikorsky helicopter programs due to higher volume on Seahawk and CH-53K programs.

RMS’ operating profit in the first quarter of 2024 increased $80 million, or 23%, compared to the same period in 2023.

The increase was primarily attributable to higher operating profit of $40 million on IWSS programs due to higher volume described above and a favorable profit rate adjustment as a result of the delivery of a ground-based radar which retired the technical risk; and $25 million on Sikorsky helicopter programs due to higher volume described above and higher margins due to contract mix, partially offset by unfavorable profit adjustments on Seahawk programs.

Total net profit booking rate adjustments were $30 million lower in the first quarter of 2024 compared to the same period in 2023.

Space 

Space’s net sales in the first quarter of 2024 increased $310 million, or 10%, compared to the same period in 2023.

The increase was primarily attributable to higher net sales of $140 million for strategic and missile defense programs due to higher volume on Fleet Ballistic Missile (FBM) and ramp up in the hypersonic and Next Generation Interceptor (NGI) development programs; and higher net sales of $115 million for national security space programs due to higher volume on Transport Layer and GPS III programs and ramp up on the Tracking Layer program.

Space’s operating profit in the first quarter of 2024 increased $45 million, or 16%, compared to the same period in 2023.

The increase was primarily attributable to $30 million of higher equity earnings from the company’s investment in United Launch Alliance (ULA) due to higher launch volume, and higher operating profit of $20 million on strategic and missile defense programs due to the higher volume described above.

These increases were partially offset by lower operating profit of $25 million for national security space programs due to the impact of lower net favorable profit adjustments on Next Gen OPIR as a result of the timing of the award and incentive fee assessments.

Total net profit booking rate adjustments were $30 million lower in the first quarter of 2024 compared to the same period in 2023.

Total equity earnings/(losses) (primarily ULA) represented approximately $15 million or 5% in the first quarter of 2024, compared to approximately $(15) million or (5)% for the same period in 2023.

Income Taxes

The company’s effective income tax rate was 15.8% and 15.3% for the quarters ended March 31, 2024 and March 26, 2023.

The rates for all periods benefited from research and development tax credits, tax deductions for foreign derived intangible income, dividends paid to the company’s defined contribution plans with an employee stock ownership plan feature and employee equity awards.

Use of Non-GAAP Financial Measures

This news release contains the following non-generally accepted accounting principles (non-GAAP) financial measures (as defined by U.S. Securities and Exchange Commission (SEC) Regulation G).

While management believes that these non-GAAP financial measures may be useful in evaluating the financial performance of the company, this information should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

In addition, the company’s definitions for non-GAAP financial measures may differ from similarly titled measures used by other companies or analysts.

Business segment operating profit

Business segment operating profit represents operating profit from the company’s business segments before unallocated income and expense.

This measure is used by the company’s senior management in evaluating the performance of its business segments and is a performance goal in the company’s annual incentive plan. Business segment operating margin is calculated by dividing business segment operating profit by sales.

The table below reconciles the non-GAAP measure business segment operating profit with the most directly comparable GAAP financial measure, consolidated operating profit.

Free cash flow

Free cash flow is cash from operations less capital expenditures.

The company’s capital expenditures are comprised of equipment and facilities infrastructure and information technology (inclusive of costs for the development or purchase of internal-use software that are capitalized).

The company uses free cash flow to evaluate its business performance and overall liquidity and it is a performance goal in the company’s annual and long-term incentive plans.

The company believes free cash flow is a useful measure for investors because it represents the amount of cash generated from operations after reinvesting in the business and that may be available to return to stockholders and creditors (through dividends, stock repurchases and debt repayments) or available to fund acquisitions or other investments.

The entire free cash flow amount is not necessarily available for discretionary expenditures, however, because it does not account for certain mandatory expenditures, such as the repayment of maturing debt and pension contributions.

Adjusted earnings before income taxes; adjusted net earnings and adjusted diluted EPS

Earnings before income taxes, net earnings and diluted earnings per share (EPS) were impacted by certain non-operational items for all periods.

Management believes the presentation of these measures adjusted for the impacts of these non-operational items is useful to investors in understanding the company’s underlying business performance and comparing performance from period to period.

The tax effects related to each adjustment that impacted earnings before income taxes are based on a blended tax rate that combines the federal statutory rate of 21% plus an estimated state tax rate.

For additional information, visit the company’s website: www.lockheedmartin.com.