Lockheed Martin (LMT 5.92%) stock tumbled 4.7% through 11:45 a.m. after missing analyst targets for sales and earnings in its Q1 2026 earnings report this morning.
Heading into the report, analysts forecast Lockheed would earn $6.74 per share on quarterly sales of $18.3 billion. In fact, the defense giant earned only $6.44 per share, and sales were only $18 billion, missing on both top and bottom lines.
Image source: Getty Images.
Lockheed Martin Q1 earnings
Despite increased demand for its products in the lead-up to the Iran War, Lockheed scored zero sales growth -- exactly flat year over year -- and earnings declined a steep 11.5%. Most discouraging of all, Lockheed Martin's free cash flow for the quarter turned negative: $291 million.
How did this happen?
One clue: CEO Jim Taiclet says Lockheed "pioneered a number of commercially inspired, long-term business arrangements with U.S. government leadership" -- possibly in response to criticism from President Trump over the company's high profit margins and low production rates earlier in the year. To address these concerns, it appears Lockheed is spending money to build capacity to produce extra Patriot and THAAD missiles for air defense, as well as more Precision Strike (PrSM) missiles for offense.
This would both explain the reversal in the company's free cash flow and weigh on the company's reported profits.
NYSE: LMT
Key Data Points
What's next for Lockheed stock?
That's the bad news. Now here's the good: In exchange for Lockheed agreeing to invest in production upgrades, the Pentagon has made "multi-year demand commitments" to buy more missiles from Lockheed. This will support tripling or even quadrupling missile production rates.
As a result, Lockheed now anticipates hitting sales of up to $80 billion this year, with earnings of up to $30.25 per share, and free cash flow turning positive again, up to $6.8 billion.
