Lockheed Martin Shares Plunge: What Investors Need to Know

Lockheed Martin (LMT) shares took a nosedive today, falling 7% as of 12:31 p.m. EDT. The reason? The Trump administration awarded Boeing the $20 billion initial contract to produce the F-47, the sixth-generation fighter jet for the U.S. Department of Defense. This was a significant upset for Lockheed Martin, which had been the favorite to win the contract among analysts. The F-35, Lockheed Martin's fifth-generation fighter jet, has been a controversial piece of defense equipment, with production plagued by delays and its usefulness relative to its cost coming into question. The Government Accountability Office noted last year that the projected costs to sustain the F-35 program have ballooned by 44% since 2018, from a projected $1.1 trillion to $1.58 trillion. The cost to maintain a single F-35 is now $6.6 million annually, well above the $4.1 million originally projected. This is in spite of the emergence of advanced unmanned drones, which have removed some of the need for advanced manned warfighters.

The loss of the F-47 contract is a significant setback for Lockheed Martin, but it's not a death knell for the stock. As of last year, the U.S. sustains about 630 F-35s, but it's likely to buy 2,500 in total by the 2040s and sustain the F-35 program into the 2080s. That should sustain Lockheed's F-35 revenue and profits for decades. Moreover, Lockheed will now have the opportunity to bid on other advanced weapon programs and divert its capacity there. That said, today's loss adds a bit of uncertainty to Lockheed's medium-term growth profile. This is on top of the increased uncertainty around in general, which has come under further scrutiny under the new administration and its Department of Government Efficiency (DOGE) program.



Lockheed Martin's 2024 financial performance was mixed. The company reported fourth quarter 2024 net sales of $18.6 billion, compared to $18.9 billion in the fourth quarter of 2023. Net earnings in the fourth quarter of 2024 were $527 million, or $2.22 per share, including $1.7 billion ($1.3 billion, or $5.45 per share, after-tax) of losses for classified programs, compared to $1.9 billion, or $7.58 per share, in the fourth quarter of 2023. Cash from operations was $1.0 billion in the fourth quarter of 2024, after a pension contribution of $990 million, compared to $2.4 billion in the fourth quarter of 2023. Free cash flow was $441 million in the fourth quarter of 2024, after a pension contribution of $990 million, compared to $1.7 billion in the fourth quarter of 2023. Fourth quarter 2024 results included 13 weeks, compared to 14 weeks for fourth quarter 2023, which had an unfavorable impact on sales volume across the company.

Net sales in 2024 were $71.0 billion, compared to $67.6 billion in 2023. Net earnings in 2024 were $5.3 billion, or $22.31 per share, including $2.0 billion ($1.5 billion, or $6.16 per share, after-tax) of losses for classified programs, compared to $6.9 billion, or $27.55 per share, in 2023. Cash from operations was $7.0 billion in 2024, after a pension contribution of $990 million, compared to $7.9 billion in 2023. Free cash flow was $5.3 billion in 2024, after a pension contribution of $990 million, compared to $6.2 billion in 2023.

"2024 was another successful and productive year for Lockheed Martin. Our 5% sales growth and record year-end backlog of $176 billion demonstrate the enduring global demand for our advanced defense technology and systems," said Jim Taiclet, Lockheed Martin's Chairman, President and CEO. "In the year, we invested over $3 billion in advancing our nation's security through research and development and capital investment to support our customers' missions, drive innovation and transform our operations with the latest digital and manufacturing technologies. Our strong and consistent performance also enabled us to again return greater than 100% of free cash flow to our shareholders in 2024."

Lockheed Martin is committed to developing and delivering the best military capabilities in the world, better than any potential adversary can hope to have. One of our most critical investments in 2024 was in ensuring continued air superiority for the United States and its allies. We are fully committed to developing a combined air power solution set that integrates new 6th generation with current 5th generation and 4th generation aircraft using wingman drones, AI, advanced sensors in space and in the air, and 5G-level, cyber-hardened data links. Our leading technical and manufacturing capabilities, the innovative spirit that originated in our Skunk Works® operation, our incredibly capable workforce, along with the derisking actions we executed in the fourth quarter, position us well for strong performance in 2025. We look forward to working with the incoming administration to best serve our customers with highly reliable, theater-level mission solutions that can win wars while delivering compelling results to our shareholders.

In conclusion, while the loss of the F-47 contract is a setback for Lockheed Martin, the company's long-term revenue and earnings projections are still supported by the sustained demand for the F-35 program. However, the loss of the F-47 contract adds a layer of uncertainty to Lockheed Martin's medium-term growth prospects, as the company will need to find alternative sources of revenue to offset the loss of this significant contract.