No defense contractor ever complained about a state of perpetual war, which is why Lockheed Martin Corp. (LMT) has seen its stock rise about $200 per share since July 2013. Lockheed Martin is the largest defense contractor in the world that contracted with the United States Navy for $150 million (with options for nearly a billion dollars) to provide a high-energy laser weapons system. In fact, Lockheed Martin is the U.S. government’s largest contractor of any kind, with amounts obligated twice the size of the next amounts obligated.
Lockheed Martin reported net sales of $13.4 billion for Q2 2018, compared to $12.6 billion for Q2 2017.
Lockheed Martin's Business Segments and Net Worth
Lockheed Martin consists of four business segments, including aeronautics, missiles and fire control, rotary and mission systems, and space.
Aeronautics is the biggest, generating $5.3 billion of Lockheed Martin’s net sales in Q2 2018, an 8% increase from Q2 2017. The F-35 fighter plane generated $370 million of Lockheed's aeronautics sales for this quarter. That number includes testing, development and other aspects beyond construction, too. As the Department of Defense wants to have 2,456 of these planes on hand, Lockheed Martin should be among the largest defense manufacturers in the world for a long time.
Other high-volume sellers in the aeronautics sector include the F-22 Raptor, F-16 Fighting Falcon, C-130 Hercules and C-5M Super Galaxy. The first two are fighter jets, while the latter are transport planes.
Missiles and Fire Control
Missiles and fire control generated $2.08 billion in sales for Lockheed Martin in Q2 2018. Lockheed Martin missiles run the gamut from giant 14-foot, 2,250-pound surface-to-surface missiles to the considerably more compact FGM-148 Javelin shoulder-fired missiles. The latter, each light enough for one person to carry, cost a quarter of a million dollars each and there are over 40,000 of them in existence. Many are sold to U.S, international, and other commercial interests.
Despite its common definition in the civilian world, “fire control” has nothing to do with the abatement of flames. Rather, it means the computers and radar that work in tandem to help a weapon hit its target. A Boeing (BA) AH-64 Apache helicopter is a remarkable and powerful piece of equipment, but it still needs a fire control system – typically courtesy of Lockheed Martin – to be of value.
Rotary and Mission Systems
Rotary and mission systems brought in $3.5 billion for Q2 2018. If it wasn't for the U.S. government’s propensity for spending, this is a segment that would come in lighter. Nearly three-quarters of mission systems and training sales are to the feds, almost all the rest to foreign governments.
The mission systems themselves are exceedingly detailed. They include radar, missile canisters, launcher cells and more, depending on which ship (most domestic sales are to the Navy) they’re attached to. For example, one major program is the Aegis Combat System, a fleet ballistic missile defense system for the U.S. Navy and international customers. It is also an element of the U.S. missile defense system.
That leaves space systems, which brought in $2.4 billion for the company. This growing juggernaut relies on the U.S. government for the majority of its revenue. The space segment represents 18% of total net sales.
Space-based infrared systems, which let the Air Force track missiles in flight, are part of this segment. So are the Air Force’s next generation of satellites, along with satellites for the Navy and a new batch for the National Oceanic and Atmospheric Association’s meteorological operations. If it conducts business more than 62 miles off the ground, Lockheed Martin lists it. It is also involved in a major program developing the Orion Multi-Purpose Crew Vehicle, a spacecraft for the National Aeronautics and Space Administration (NASA). This product is intended to be used in human exploration missions beyond low earth orbit.
The Bottom Line
Competitive edge? Check. At the frontiers of technology? Check. In a vital business? Check. Influential enough to remain the largest vendor to the biggest client on Earth, the United States government? Check. Compound that with Lockheed Martin’s political influence, however you choose to interpret that, and you couldn't ask for a bigger list of advantages for a company.
In peacetime, Lockheed Martin makes billions. In wartime, it makes billions more. Years from now, when the largest social media and internet companies of today have fallen into irrelevance, Lockheed Martin should still be thriving.