Lockheed Martin Reports Third Quarter 2024 Financial Results
Net sales of $17.1 billion, an increase of 1% year over year
Net earnings of $1.6 billion, or $6.80 per share
Cash from operations of $2.4 billion and free cash flow of $2.1 billion
$1.6 billion of cash returned to shareholders through dividends and share repurchases
Increased share repurchase authority by $3.0 billion to a total authorization of $10.3 billion
Increased quarterly dividend 5% to $3.30 per share
2024 financial outlook increased
BETHESDA, Md., Oct. 22, 2024 /PRNewswire/ -- Lockheed Martin Corporation (NYSE:LMT) today reported third quarter 2024 net sales of $17.1 billion, compared to $16.9 billion in the third quarter of 2023. Net earnings in the third quarter of 2024 were $1.6 billion, or $6.80 per share, compared to $1.7 billion, or $6.73 per share, in the third quarter of 2023. Cash from operations was $2.4 billion in the third quarter of 2024, compared to $2.9 billion in the third quarter of 2023. Free cash flow was $2.1 billion in the third quarter of 2024, compared to $2.5 billion in the third quarter of 2023.
"In the third quarter, we advanced our strategic, operational and financial priorities, as demonstrated by our record backlog of more than $165 billion, 48 F-35 deliveries, increased production on missile programs, and $2.1 billion of free cash flow generation," said Lockheed Martin Chairman, President and CEO Jim Taiclet.
"As a result of our strong year-to-date results and confidence in our near-term performance, we are raising the outlook for full year 2024 sales, segment operating profit, EPS and free cash flow. Looking forward, we continue to make progress on the three key initiatives of our 21st Century Security® strategy of strengthening the resiliency and scalability of our production system, accelerating cutting edge digital and physical technologies into all our mission solutions and our internal operations, and expanding international partnerships to broaden our production capacity and drive more international sales. We are making substantial investments in these areas, while continuing to focus on our fundamental financial objective of driving free cash flow per share growth to generate returns for shareholders. Given our confidence in the company's ability to deliver on these objectives, our Board has also approved a five percent increase in our quarterly dividend, the 22nd consecutive year of increases."
Summary Financial Results
The following table presents the company's summary financial results.
(in millions, except per share data)
Quarters Ended
Nine Months Ended
Sept. 29,
2024
Sept. 24,
2023
Sept. 29,
2024
Sept. 24,
2023
Net sales
$ 17,104
$ 16,878
$ 52,421
$ 48,697
Business segment operating profit1
$ 1,870
$ 1,810
$ 5,657
$ 5,347
Unallocated items
FAS/CAS pension operating adjustment
406
414
1,218
1,245
Impairment and severance charges
—
—
(87)
—
Intangible asset amortization expense
(61)
(61)
(183)
(185)
Other, net
(75)
(121)
(288)
(193)
Total unallocated items
270
232
660
867
Consolidated operating profit
$ 2,140
$ 2,042
$ 6,317
$ 6,214
Net earnings2
$ 1,623
$ 1,684
$ 4,809
$ 5,054
Diluted earnings per share2
$ 6.80
$ 6.73
$ 20.05
$ 19.97
Cash from operations3
$ 2,438
$ 2,891
$ 5,949
$ 5,555
Capital expenditures
(355)
(364)
(1,103)
(987)
Free cash flow1,3
$ 2,083
$ 2,527
$ 4,846
$ 4,568
1
Business segment operating profit and free cash flow are non-GAAP measures. See the "Use of Non-GAAP Financial Measures" section of this news release for more information.
2
Net earnings for the quarter ended Sept. 29, 2024 included $14 million ($10 million, or $0.04 per share, after-tax) of net non-operational charges. See "Adjusted earnings before income taxes; adjusted net earnings and adjusted diluted EPS" table for further details.
3
See the "Cash Flows and Capital Deployment Activities" section of this news release for more information.
F-35 Lots 18-19 Contract Update
The company remains in negotiations with the U.S. Government on the Lots 18-19 production contract. Although negotiations for this contract are in process, the company has been performing work on Lots 18-19 production under initial customer authorization and funding to begin work pursuant to an advance acquisition contract received in the fourth quarter of 2023. The company and its industry team continue work in an effort to meet the customer's desired aircraft delivery dates for the Lots 18-19 aircraft. The company's costs began to exceed the advanced acquisition contract value in the third quarter of 2024. As a result, the company was unable to recognize revenue and profit on approximately $400 million of costs incurred on the program in the third quarter of 2024, with at least an additional $300 million of impacts across the supply chain. Additionally, the company was prevented from invoicing and receiving cash of approximately $450 million through the third quarter of 2024. At the end of the third quarter of 2024, the company also had approximately $2 billion in potential termination liability exposure to third parties related to Lots 18-19 (some of which would be recoverable in the unlikely event of a termination). Currently, the company expects to receive contractual authorization and funding on the Lots 18-19 production contract with the U.S. Government and resume invoicing costs incurred and recover sales, profit, and cash in the fourth quarter of 2024. However, until a final agreement is reached, or the U.S. Government otherwise provides additional contractual authorization and funding, the company's results of operations, cash flows, and financial condition will continue to be negatively impacted, and the impacts could be material and differ from the company's current 2024 outlook.
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 or discretionary contributions, 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.
(in millions, except per share data)
Current Update1
July 2024
Net sales
~$71,250
$70,500 - $71,500
Business segment operating profit2
~$7,475
$7,350 - $7,500
Total FAS/CAS pension adjustment
~$1,685
~$1,685
Diluted earnings per share3
~$26.65
$26.10 - $26.60
Cash from operations
~$7,950
$7,750 - $8,050
Capital expenditures
~$1,750
~$1,750
Free cash flow2
~$6,200
$6,000 - $6,300
1
The company's current 2024 financial outlook is premised on receiving contractual authorization and funding on the F-35 Lots 18-19
production contract in the fourth quarter of 2024.
2
Business segment operating profit and free cash flow are non-GAAP measures. See the "Use of Non-GAAP Financial Measures" section of
this news release for more information.
3
Although the company typically does not update its outlook for proposed changes in law, the above includes the effect of IRS Notice 2023-63
confirming that certain expenditures incurred in the performance of cost-type contracts are not subject to capitalization for tax purposes. The
company believes incorporating the clarification from the Notice more accurately reflects its expectations because the Notice describes the tax
treatment of certain expenditures in accordance with the company's analysis of the Internal Revenue Code.
Cash Flows and Capital Deployment Activities
The decrease in operating and free cash flows in the third quarter of 2024 compared to the same period in 2023 was primarily due to a decrease in working capital (defined as receivables, contract assets, and inventories less accounts payable and contract liabilities), which includes the cash impacts for the lack of additional contractual authorization and funding from the U.S. Government prior to the end of the third quarter of 2024 on the Lots 18-19 contract of the F-35 program.
The company's cash activities in the third quarter of 2024, included the following:
paying cash dividends of $749 million; and
paying $850 million to repurchase 1.5 million shares.
As previously announced on Oct. 2, 2024, the company's board authorized the repurchase of its common stock up to an additional $3.0 billion, increasing the total authorization for potential future common stock repurchases to $10.3 billion. The stock repurchase program does not have an expiration date and may be amended or terminated by the board of directors at any time. The amount of shares ultimately purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation.
Additionally, on Oct. 2, 2024, the company authorized a fourth quarter dividend payment of $3.30 per share, representing an increase of $0.15 per share over the prior quarterly dividend payment.
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.
(in millions)
Quarters Ended
Nine Months Ended
Sept. 29,
2024
Sept. 24,
2023
Sept. 29,
2024
Sept. 24,
2023
Net sales
Aeronautics
$ 6,487
$ 6,717
$ 20,609
$ 19,861
Missiles and Fire Control
3,175
2,939
9,270
8,082
Rotary and Mission Systems
4,367
4,121
13,003
11,528
Space
3,075
3,101
9,539
9,226
Total net sales
$ 17,104
$ 16,878
$ 52,421
$ 48,697
Operating profit
Aeronautics
$ 659
$ 671
$ 2,089
$ 2,064
Missiles and Fire Control
456
398
1,217
1,146
Rotary and Mission Systems
483
482
1,408
1,286
Space
272
259
943
851
Total business segment operating
profit
1,870
1,810
5,657
5,347
Unallocated items
FAS/CAS operating adjustment
406
414
1,218
1,245
Impairment and severance charges
—
—
(87)
—
Intangible asset amortization
expense
(61)
(61)
(183)
(185)
Other, net
(75)
(121)
(288)
(193)
Total unallocated items
270
232
660
867
Total consolidated operating profit
$ 2,140
$ 2,042
$ 6,317
$ 6,214
For information on factors impacting comparability of the company's segment sales, operating profit and operating margins, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the company's Annual Report on Form 10-K for the year ended Dec. 31, 2023.
The company's consolidated net favorable profit booking rate adjustments represented approximately 20% and 19% of total segment operating profit in the quarters ended Sept. 29, 2024 and Sept. 24, 2023. During the quarter ended Sept. 29, 2024, the company recognized losses of $80 million on a classified program at the company's Aeronautics business segment due to higher than anticipated costs to achieve program objectives.
Aeronautics
(in millions)
Quarters Ended
Nine Months Ended
Sept. 29,
2024
Sept. 24,
2023
Sept. 29,
2024
Sept. 24,
2023
Net sales
$ 6,487
$ 6,717
$ 20,609
$ 19,861
Operating profit
659
671
2,089
2,064
Operating margin
10.2 %
