Lockheed Martin Earnings Likely Fell 5% On Supply Chain Woes, Higher Costs

Higher Q1 Sales Expected To Taper Through Year, Buybacks Buoy Stock Price

Lockheed Martin modules

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Lockheed Martin Corp. (LMT) is expected to post lower earnings for the first quarter due to supply chain constraints and higher costs when it reports before markets open on Tuesday.

Key Takeaways

  • Lockheed Martin is projected to report lower earnings per share (EPS) of $6.12, below the $6.44 it recorded for the same quarter a year ago.
  • Sales for Lockheed Martin for the first quarter are expected to be up somewhat, but may fall over the course of the year.
  • Lockheed Martin spent almost $8 billion on stock buybacks in 2022, which helped boost its stock price.
  • U.S. defense spending is projected to rise 3%, which should benefit Lockheed Martin and other defense contractors.

Lockheed Martin’s earnings per share (EPS) are forecast at $6.12, about 5% lower compared with the $6.44 it posted in 2022’s first quarter, according to estimates from Visible Alpha.  However, Lockheed’s first-quarter sales are expected to be higher, coming in at $15 billion, fractionally better than its 2022 first quarter. 

The fighter jet maker suffered slower sales in 2022, though its fourth-quarter year-over-year sales figures were higher. Supply chains, though improved, have not returned to pre-pandemic efficiencies and that continues to hurt defense manufacturers. Adding to that pain are labor shortages. Those factors translate to higher costs for companies such as Lockheed Martin.

During its previous earnings announcement, CEO James Taiclet said Lockheed's better-than-expected finish to the year “demonstrated the company’s reliability and resiliency to meet commitments in challenging environments.”

However, both Visible Alpha forecasts and Lockheed Martin’s own projections show the aircraft maker’s sales could fall again this year. Analysts project annual sales of $65.5 billion in 2023, in line with Lockheed’s $65 billion to $66 billion forecast but lower than the nearly $66 billion sales figure the company posted in 2022. That result was down from 2021 when the company generated $67 billion in net sales.

   Q1 2023 (est) Q1 2022   Q1 2021
Net Sales  $15.04B $14.96B $16.25B
Net Income  $1.56B $1.73B $1.83B
Diluted earnings per share $6.12 $6.44 $6.56

Source: Visible Alpha

Stock Moving Higher on the Year

Lockheed Martin's reduced sales numbers aren’t affecting the company’s stock. Its shares have been rising, up 12% since a 2023 low in January, closing at $492.14 on April 13, a little shy of its Dec. 2022 all-time high of $498.95. This follows 37% growth in the company share price value in 2022.

One factor influencing Lockheed Martin’s share price is the company’s stock repurchase plan. In 2022, the company bought back $7.9 billion of its stock, following $4 billion spent on stock buybacks in 2021. 

Defense spending has been another positive for U.S. defense contractors like Lockheed, which make the drones, satellites, jets, surveillance technology, and missiles needed in conflicts like Russia’s invasion of Ukraine. Not only will the U.S. military likely remain a steady customer, but so will Europe, as some estimates suggest European defense spending could increase by about two-thirds between 2021 and 2026.

Opportunity should continue for Lockheed, as global tensions and conflicts, including the war in Ukraine, help keep defense spending robust. In March, President Joe Biden laid out a $842 billion budget for the Pentagon, a 3% bump up from last year.

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Article Sources
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  1. Visible Alpha. "Financial Data."

  2. Deloitte. "2023 aerospace and defense industry outlook."

  3. Lockheed Martin. "Lockheed Martin Reports Fourth Quarter And Full Year 2022 Financial Results."

  4. YCharts. "Lockheed Martin Price."

  5. YCharts. "Lockheed Martin All-time High."

  6. YCharts. "Lockheed Martin Corp. (LMT)."

  7. McKinsey & Co. "Invasion of Ukraine: Implications for European Defense Spending."

  8. Barron’s. “Pentagon Budget Grows. Defense Stocks Don't

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