Lockheed Martin Shares Plunge on $1.6 Billion in Program Charges
Lockheed Martin (NYSE: LMT) saw its shares tumble 7.2% in premarket trading Tuesday after reporting a bruising second-quarter earnings miss, marked by over $1.6 billion in program-related charges and sharply reduced profits.
The U.S. defense giant posted revenue of $18.2 billion, narrowly missing Wall Street’s $18.54 billion consensus and only a touch above last year’s $18.1 billion. Net earnings collapsed to $342 million ($1.46 per share), down from $1.6 billion ($6.85 per share) a year ago and well below analyst forecasts of $6.42.
Heavy Charges Weigh on Results
Lockheed cited a series of program-specific write-downs that slashed earnings by $5.83 per share:
$950 million on a classified Aeronautics program due to cost overruns and performance issues
$570 million on the Canadian Maritime Helicopter Program
$95 million on Turkey's utility helicopter program
$169 million in other charges, including an asset write-off on the U.S. Air Force’s NGAD project
CEO Jim Taiclet attempted to reassure investors:
“Our F-35s, F-22s, PAC-3, THAAD, Aegis and many others performed extremely well in the most crucial and challenging situations… Our U.S. and allied customers are asking us to elevate and accelerate many key programs.”
Cash Flow Takes a Hit
Cash generation also deteriorated sharply:
Operating cash flow: $201 million, down from $1.9 billion a year ago
Free cash flow: –$150 million, compared with +$1.5 billion last year
Lockheed attributed the drop to delayed customer payments and higher inventory needs, particularly at its Sikorsky helicopter unit.
Outlook and Guidance
Despite the disappointing quarter, Lockheed reaffirmed full-year 2025 sales guidance of $73.75–$74.75 billion and free cash flow of $6.6–$6.8 billion. However, it slashed its earnings forecast to $21.70–$22.00 per share, down from a prior estimate of $27.00–$27.30.
Segment Performance
Aeronautics: Sales rose 2% to $7.4 billion, but a massive classified program charge pushed the unit into a $98 million operating loss.
Missiles and Fire Control: Sales climbed 11% with $479 million in operating profit, boosted by demand for tactical missiles.
Rotary and Mission Systems: Revenue dropped 12% to $4 billion, with a $172 million operating loss tied to helicopter program charges and lower production.
Space: Sales grew 4% to $3.3 billion, with $362 million in operating profit on missile defense and civil space contracts.
Looking Ahead
Lockheed’s backlog and long-term demand pipeline remain intact, bolstered by next-gen technologies like its “Golden Dome for America” missile defense project. Still, investors remain cautious, with execution risks and margin pressures expected to linger in the coming quarters.
Taiclet summed it up:
“The program charges…are a necessary step as we continue to take action to improve program execution.”