Lockheed Martin Faces Significant Q2 Earnings Drop Due to Program Losses

Lockheed Martin Corp. (NYSE: LMT) witnessed a notable decrease in its share price, with a 7.2% drop in premarket trading, after announcing reduced second-quarter earnings. The defense contractor's financial performance was significantly impacted by over $1.6 billion in program-related charges, leading to results that fell short of Wall Street expectations. The company reported revenue of $18.2 billion for the quarter, slightly up from $18.1 billion the previous year but below the analysts' consensus estimate of $18.54 billion.

The net earnings for the quarter were $342 million, or $1.46 per share, a stark decline from $1.6 billion, or $6.85 per share, in the prior-year period. This downturn was largely due to write-downs associated with various aerospace and helicopter programs, including a $950 million pretax charge on a classified Aeronautics program, $570 million in losses related to the Canadian Maritime Helicopter Program, and $95 million tied to Turkey’s utility helicopter program.

Despite these challenges, Lockheed Martin's Chairman and Chief Executive, Jim Taiclet, reassured investors about the company's critical role in global operations and its long-term growth prospects. Taiclet highlighted the performance of key programs like the F-35s and F-22s and the potential of advanced technologies in development to drive future growth.

The company's cash generation also saw a significant decline, with cash from operations dropping to $201 million from $1.9 billion a year ago, and free cash flow turning negative. Lockheed Martin attributed this to increased working capital requirements, including delayed customer payments and higher inventories.

Looking ahead, Lockheed Martin maintained its full-year 2025 sales guidance but sharply reduced its diluted earnings per share forecast. The company's performance across different segments was mixed, with Aeronautics revenue increasing but posting an operating loss, while Missiles and Fire Control saw sales and operating profit growth.

The quarterly results have raised concerns among investors about execution risks and potential margin pressures, as reflected in the stock's decline. However, Lockheed Martin emphasized the strength of its backlog, global demand, and investments in next-generation technologies as key factors for future resilience.