Lockheed Martin Corp. (LMT) is a global defense and aerospace company engaged in research, design, development, manufacturing, and services. The company operates through four main business segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space.

Lockheed competes both in the U.S. and internationally. Some of its big-name competitors include aircraft manufacturer Boeing Co. (BA), defense firm Raytheon Co. (RTN), defense and aerospace company BAE Systems Inc., and global defense company Northrop Grumman Corp. (NOC).

Key Takeaways

  • Lockheed Martin provides advanced technology systems, products, and services related to the aerospace and defense industry.
  • The biggest share of Lockheed's sales come from the aeronautics business.
  • Lockheed exceeded its F-35 aircraft delivery goal for 2019.
  • Rising geopolitical tensions and the escalating conflict with Iran may increase government defense spending, boosting revenue and profit for Lockheed.

Lockheed Martin's Financials

Lockheed Martin posted net income of $5.0 billion on $53.8 billion of revenue in 2018 for a net profit margin of 9.3%. As much as 71.7%, or $38.6 billion, of revenue originated domestically. The remaining 28.3% came from other regions across the globe, including Asia Pacific (9.9%), Europe (10.0%), the Middle East (6.7%), and Other (1.7%). The U.S. government is the company’s biggest client, accounting for 70%, or $37.7 billion, of total revenue.

Growth in both net income and revenue accelerated in 2018. Lower taxes from the Trump administration’s Tax Cuts and Jobs Act helped net income soar by 157.1%. One reason for that gain is that a one-time tax charge of $2.0 billion related to the Act resulted in net income falling by as much as 62.1% in 2017. Revenue rose by 7.6% in 2018 compared to 5.6% in 2017.

Through the first three quarters of 2019, revenue growth accelerated further. For the nine-month period that ended September, Lockheed posted an 11.6% increase in revenue from the year earlier period. With the one-time effect of the tax cuts behind it, net income returned to a slower, but still strong, growth rate. Net income jumped by 24.8% through the first three quarters of 2019 compared to the year ago period.

Lockheed Martin's Business Segments

Lockheed Martin operates four main business segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. The company breaks down its revenue and operating income in the four main segments below.

Aeronautics

Lockheed's Aeronautics business engages in the research, design, development, manufacture, integration, sustainment, support and upgrade of advanced military aircraft, unmanned air vehicles, and related technologies. 

The Aeronautics segment posted $21.2 billion in revenue and $2.3 billion in operating profit in 2018, comprising 39.4% of the company’s total revenue and 39.0% of its total operating profit of $5.9 billion. The segment’s revenue grew by 9.4% throughout 2018 compared to 12.2% throughout 2017. Operating profit grew by 4.4% in 2018 versus 17.9% throughout 2017. Through the first three quarters of 2019, Aeronautics revenue grew by 12.7% year-over-year (YOY).

Missiles and Fire Control

Lockheed's Missiles and Fire Control business offers a diverse range of products and services, including air and missile defense systems, logistics, fire control systems, mission operations support, manned and unmanned ground vehicles, and energy management solutions. 

The segment posted $8.5 billion in revenue and $1.2 billion in operating profit in 2018, comprising 15.8% of the company’s total revenue and 20.3% of its total operating profit. The segment’s revenue grew by 16.2% in 2018 compared to 7.3% throughout 2017. Operating profit grew 20.7% throughout 2018 versus 3.0% throughout 2017.  Through the first three quarters of 2019, Missiles and Fire Control revenue grew by 22.0% compared to the year ago period.

Rotary and Mission Systems

Lockheed's Rotary and Mission Systems business provides design, manufacture, service and support for areas such as military and commercial helicopters; ship and submarine systems, sea and land-based missile defense systems, and cybersecurity.

The segment posted $14.3 billion in revenue and $1.3 billion in operating profit in 2018, comprising 26.6% of the company’s total revenue and 22.0% of its total operating profit. The segment’s revenue grew by 4.3% throughout 2018 compared to 1% throughout 2017. Operating profit grew by 44.3% throughout 2018 versus 6.7% throughout 2017. Through the first three quarters of 2019, Rotary and Mission Systems revenue grew by 5.7% YOY.

Space

Lockheed's Space business engages in a broad range of activities including the development and production of satellites, space transportation systems, and defensive systems. The segment is also responsible for various classified systems and services in support of vital national security systems.

The Space segment posted $9.8 billion in revenue and $1.1 billion in operating profit in 2018, comprising 18.2% of the company’s total revenue and 18.6% of total operating profit. The segment’s revenue grew by 2.1% throughout 2018 compared to essentially flat growth throughout 2017. Operating profit grew by 7.7% throughout 2018 after falling 23.9% throughout 2017. Through the first three quarters of 2019, Space revenue grew by 9.6% compared to the year earlier period. 

Lockheed Martin's Recent Developments

Lockheed Martin recently announced that it exceeded its 2019 delivery target for its F-35 Lightning II Joint Strike Fighter, representing a 47% increase from 2018 and a nearly 200% increase from 2016. In 2018, the F-35 generated 27% of Lockheed’s total consolidated revenue and 68% of its Aeronautics segment’s revenue. 

Rising tensions in the Middle East, especially between the U.S. and Iran, could lead to more demand for Lockheed's military products and services. Tensions between Iran and the U.S. have been escalating ever since U.S. President Donald Trump first pulled out of the 2015 nuclear deal in the spring of 2018. More recently, Trump ordered an air strike that killed top Iranian general Qasem Soleimani on January 3.