What happened

Shares of Lockheed Martin (NYSE:LMT) climbed more than 5% on Tuesday morning after the world's largest defense contractor reported first-quarter earnings that easily surpassed analyst expectations and raised its outlook for the full year.

So what

Lockheed Martin kicked off defense earnings season by reporting first-quarter earnings of $5.99 per share on revenue of $14.3 billion, easily besting analyst expectations for $4.34 per share in earnings on revenue of $12.52 billion. Every business unit inside Lockheed surpassed revenue expectations, led by missiles, up 40% year over year, and aeronautics, up $659 million from the year prior thanks to growing F-35 volumes.

Lockheed Martin F-35 in flight.

Lockheed Martin's F-35 in flight. Image source: Lockheed Martin.

The company generated $1.38 billion in free cash flow during the quarter and, as of March 31, reported a 1.21-times book-to-bill ratio.

Lockheed Martin said it expects to earn $20.05 to $20.35 per share in all of 2019 on revenue of between $56.75 billion and $58.25 billion, higher than the company's prior forecast and ahead of current consensus for $19.58 per share in earnings on sales of $56.81 billion.

"Our differentiated portfolio and record backlog position us well for continued growth, and we remain focused on delivering innovative technologies and solutions for our customers, and long-term value creation for stockholders," Lockheed Martin chairman and CEO Marillyn Hewson said in a statement.

Now what

Lockheed Martin likely benefited by the Department of Defense's strong weapons outlay in the first three months of the year, up more than 25% from a year prior, so it is reasonable to hope that this beat telegraphs strong quarters for other defense contractors who are yet to report.

But some of the outperformance is attributable to Lockheed Martin's strong and diverse portfolio, with exposure to areas including missiles, space, and aerospace that are of particular interest to the Pentagon at this time. Coming into earnings season, Lockheed Martin looked like one of the best buys in the defense sector, and these results should do nothing to lessen the enthusiasm surrounding the company.

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