Lockheed Sales Are Growing. Why the Stock Got Crushed.

Lockheed Martin, the world's largest defense contractor, reported a 5% increase in net sales for 2024, reaching $71.0 billion. Despite this growth, the company's stock price has been on a downward trajectory, with shares trading around $454.36 as of the latest data, significantly lower than its 52-week high of $618.95. This article explores the reasons behind the stock price decline despite the company's growing sales.



The decline in Lockheed Martin's stock price can be attributed to several specific factors:

1. Losses associated with classified programs: In the fourth quarter of 2024, Lockheed Martin recognized pre-tax losses of $1.7 billion associated with classified programs at its Aeronautics and Missiles and Fire Control business segments. These losses impacted earnings per share by $5.45 and contributed to the decline in stock price.
2. Delayed rollouts of F-35 tech upgrade: The company is grappling with delayed rollouts of a tech upgrade on the F-35, which contributes about 30% of its revenue. This delay has led to a cautious tone for the year and may have negatively impacted investor sentiment.
3. Mixed guidance: Although Lockheed Martin delivered a solid end to 2023, its guidance for 2025 missed Wall Street expectations, which could have contributed to the stock price decline.
4. Market sentiment and analyst opinions: Negative sentiment from analysts and market participants, as seen in various news articles, may have also contributed to the stock price decline. For instance, some analysts have expressed concerns about the company's earnings weakness and potential deeper troubles.
5. Headwinds and charges: The company faced headwinds and charges, such as pension contributions, which impacted its cash flow and earnings. For example, in 2024, Lockheed Martin made a pension contribution of $990 million, which affected its cash from operations and free cash flow.



Lockheed Martin's recent earnings and guidance have not met analysts' expectations, which has negatively impacted the stock price. The company reported net earnings of $527 million, or $2.22 per share, in the fourth quarter of 2024, including $1.7 billion ($1.3 billion, or $5.45 per share, after-tax) of losses for classified programs. This fell short of analysts' average estimate of $2.79 per share. Additionally, the company's 2025 profit forecast of $27 to $27.30 per share missed analysts' average estimate of $27.92 per share.

Despite the misses, analysts remain bullish on Lockheed Martin, with a consensus price target of $546.11, indicating a potential upside of around 16.8% from the current stock price. However, the company's recent performance and the factors contributing to the stock price decline have raised concerns among investors.

In conclusion, Lockheed Martin's growing sales have not been enough to offset the negative impact of classified program losses, delayed F-35 tech upgrades, and mixed guidance. The company's stock price has been negatively affected by these factors, and investors remain cautious despite analysts' bullish outlook. As Lockheed Martin continues to navigate these challenges, investors will be closely watching the company's progress and the potential impact on its stock price.