Lockheed Martin Tumbles After $1.7B in Charges Sink Q2 Earnings; Guidance Slashed

Three Key Takeaways:

• Lockheed Martin posted a major Q2 earnings miss due to $1.7B in program-related charges, sending shares down roughly 7%.
• The company slashed full-year EPS guidance to $21.70–22.00, well below consensus of $27.36, while reaffirming revenue and free cash flow outlooks.
• LMT is now testing critical support at the March lows near $418, as investors reassess execution risk in legacy defense programs.

Lockheed Martin (LMT) shares dropped sharply Tuesday morning after the defense contractor posted deeply disappointing second-quarter earnings marked by a series of hefty one-time charges. Despite a modest year-over-year revenue gain and an intact order backlog, the financial hit to Q2 profit and a steep downward revision to full-year EPS guidance rattled investors. The stock is down approximately 7%, approaching key technical support near the $418 level, which coincides with the March lows, a make-or-break area for sentiment around the name.

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Lockheed reported Q2 revenue of $18.2 billion, narrowly up from $18.1 billion a year earlier but below the $18.57 billion expected by analysts. More concerning was the bottom line: EPS came in at just $1.46 versus consensus estimates of $6.52. The sharp miss stemmed from $1.7 billion in total charges related to ongoing issues in several major programs. This included $950 million in pre-tax losses tied to a classified Aeronautics segment program and a further $665 million combined from its Combat Rescue Helicopter (CMHP) and Presidential Helicopter (TUHP) programs under Rotary and Mission Systems (RMS).

These charges translated to a $5.83 per share hit after taxes. Excluding these one-time items, Lockheed's performance still fell shy of expectations, underscoring ongoing challenges in program execution and cost management. Additionally, the company took $66 million in impairments related to fixed asset write-offs connected to the U.S. Air Force's next-generation fighter jet program, recently awarded to Boeing.

Q2 net income totaled $342 million, a steep decline from the $1.7 billion reported a year ago. Free cash flow was also negative at -$150 million for the quarter, further highlighting the operational strain these programs are placing on Lockheed's financials.

Looking ahead, Lockheed now expects full-year 2025 EPS of $21.70 to $22.00, well below the prior forecast of $27.00 to $27.30 and far under Wall Street's consensus of $27.36. However, the company maintained its revenue outlook of $73.75 to $74.75 billion and reiterated guidance for $6.6 to $6.8 billion in free cash flow.

Lockheed attributed the revised EPS outlook to "newly identified risks" discovered during a regular program review cycle, which prompted the firm to reassess its financial position across a number of legacy defense projects. Management emphasized that the write-downs were necessary to reset expectations and better align with updated program forecasts.

Despite the disappointing results, Lockheed's backlog remains robust at $166.53 billion, indicating strong long-term demand across defense markets. The company continues to benefit from elevated global geopolitical tensions and sustained U.S. defense budget support. However, execution risk, particularly in classified and development-heavy programs, will be a key investor focus going forward.

In a quarter where investors were already bracing for some turbulence, the magnitude of Lockheed's charges and the EPS guide cut came as a jarring surprise. With shares now threatening to break below key technical support and investor sentiment rattled, the onus is on management to demonstrate improved cost control and delivery performance in the second half of the year.