Image: Lockheed Martin’s shares have recovered nicely since their October 2023 bottom.
By Brian Nelson, CFA
Lockheed Martin reported better-than-expected second quarter results on July 23 and raised its 2024 outlook for sales, segment operating profit and earnings per share. Net sales increased to $18.1 billion in the second quarter from $16.7 billion in the year-ago period, while business segment operating profit came in at $2.04 billion, up from $1.86 billion in last year’s quarter. Diluted earnings per share expanded to $6.85 from $6.63 in the second quarter of 2023.
Management’s commentary in the quarterly press release was quite positive:
…demand for our defense technology solutions remains robust, with a backlog of nearly $160 billion, greater than two times annual revenue… We delivered strong second quarter financial results, with year-over-year growth of 9% in sales and 10% in segment operating profit, and free cash flow generation in excess of $1.5 billion. The year-to-date performance gives us confidence to raise our 2024 full-year outlook for sales, segment operating profit, and earnings per share.
Lockheed Martin’s cash flow from operations in the second quarter was $1.88 billion, up from $1.1 billion in the same period a year ago. Free cash flow roughly doubled in the second quarter, to $1.5 billion from $771 million during the second quarter of last year. Lockheed Martin returned ~$1.6 billion to shareholders through $752 million in cash dividends and $850 million in share repurchases in the second quarter. Total backlog stood at $158.3 billion at the end of the second quarter, down slightly from $160.6 billion at the end of last year.
Looking to all of 2024, Lockheed Martin raised its outlook. For the year, net sales are now expected in the range of $70.5-$71.5 billion (was $68.5-$70 billion), business segment operating profit is now targeted at $7.35-$7.5 billion (was $7.175-$7.375 billion), while diluted earnings per share is now expected in the range of $26.10-$26.60 (was $25.65-$26.35). It reiterated its 2024 cash flow from operations and free cash flow targets, with the latter expected in the range of $6-$6.3 billion for the year.
All told, performance across Lockheed Martin’s Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space divisions continue to move in the right direction, with all four segments showcasing improved revenue and operating profit performance during the second quarter and for the first half of the year. We like that Lockheed Martin’s free cash flow covers its dividend nicely, and while the company has a net debt position, we’re not worried about the company meeting its obligations. We continue to like Lockheed Martin as a dividend growth idea, with shares yielding ~2.6% at the time of this writing.
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Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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