Shares of Lockheed Martin (LMT 0.73%) fell 4.2% on Tuesday as stronger-than-expected quarterly results from the defense and aerospace giant were overshadowed by its mixed outlook for the coming year. The market also appears concerned for the risk of delays surrounding the first deliveries of its next-gen F-35 fighter jets.
NYSE: LMT
Key Data Points
A solid end to 2023 for Lockheed Martin
For Lockheed's fourth quarter of 2023, net sales declined 0.6% year over year to $18.87 billion, while its adjusted (non-GAAP) earnings increased 1.4% over the same period on a per-share basis to $7.90. Analysts, on average, were modeling lower earnings of $7.26 per share on revenue of $17.97 billion.
Lockheed Martin chairman and CEO Jim Taiclet called it a "solid finish to 2023," crediting "strong demand for [its] all-domain portfolio of advanced defense tech solutions."
Indeed, Lockheed's backlog climbed 7% in 2023 to $160.6 billion, and full-year revenue was up 2% to $67.6 billion. The company also generated a solid $6.2 billion of free cash flow for the year, and -- speaking to its relative earnings outperformance -- returned more than $9 billion to shareholders through a combination of dividends and stock buybacks.
What's next for Lockheed shareholders?
For 2024, Lockheed issued guidance for full-year net sales of $68.5 billion to $70 billion -- the midpoint of which sits slightly above Wall Street's consensus estimates of $68.65 billion. Lockheed also called for 2024 earnings per share ranging from $25.65 to $26.35, below estimates of $27.21 per share.
During the subsequent conference call, Lockheed management also warned that ongoing software issues related to the next-gen "TR-3" version of the F-35 fighter jet could delay the first deliveries of the upgraded jet until the third quarter of 2024. The TR-3 software will equip the new versions of the F-35 with advanced munitions, sensing, jamming, and cybersecurity capabilities. Lockheed previously told investors it was on track to start shipments of the next-gen F-35 by the second quarter.
In any case, there were no huge surprises in this quarterly update from Lockheed Martin. The company remains a solidly profitable industry leader that pays a healthy dividend yielding nearly 2.9% annually at today's prices. But it's hardly surprising to see the stock falling given likely incremental delays for one of its core programs.
