Lockheed Martin’s Robust Backlog Speaks of Sustainable Strength

Image: Shares of Lockheed have been choppy, but its fundamentals remain strong.

By Brian Nelson, CFA

On April 23, Lockheed Martin (LMT) reported better-than-expected first quarter 2024 results. Revenue advanced ~13.7% in the quarter on a year-over-year basis, while net earnings in the first quarter came in at $1.5 billion, or $6.39 per share, versus the $1.7 billion mark, or $6.61 per share, it put up in the first quarter of 2023. Cash from operations advanced to ~$1.64 billion, up from $1.56 billion in the year-ago quarter, but higher capital spending drove free cash flow slightly lower in the first period of 2024 than what it achieved in last year’s quarter.

Management had a lot to say about the quarterly results and outlook in the press release:

Our strong start to 2024 demonstrates our continued success designing, developing and delivering 21st Century Security solutions in support of integrated deterrence for customers around the world. These first quarter results reinforce our confidence in our ability to achieve the full year financial expectations we set in January. First quarter sales increased significantly year-over-year and we generated robust free cash flow of nearly $1.3 billion, while taking assertive actions to further strengthen production capacity. In addition, we continued our disciplined and dynamic capital deployment by investing over $700 million into R&D and capital projects and returned significant capital to shareholders through dividends and share repurchases as we remain committed to delivering meaningful free cash flow per share growth over the long-term.

Our $159 billion backlog includes several large National Security Space awards in the quarter and attests to the breadth of our portfolio, depth of our technical expertise, and understanding of our customers’ needs. These capabilities uniquely position us to lead the realization of joint all domain operations, including reliable battle management and command and control systems integrated across multiple domains, military services, and allied forces. We remain exceptionally focused on the execution of the F-35 program, working with our customers and suppliers to implement TR-3 capabilities, and are encouraged by the progress towards delivery of the first TR-3 configured aircraft. The innovation and open architecture solutions across our portfolio enable customers worldwide to stay prepared and agile amidst an ever-changing threat environment. 

Lockheed Martin reaffirmed its outlook for 2024. Net sales are expected in the range of $68.5-$70 billion, while business segment operating profit is targeted in the range of $7.175-$7.375 billion. Diluted earnings per share is expected to come in at $25.65-$26.35 on the year, while cash flow from operations is targeted in the range of $7.75-$8.05 billion. Free cash flow is expected in the range of $6.0-$6.3 billion. Lockheed’s total backlog of ~$159.4 billion speaks to sustainable strength in its operations, and we continue to like shares.