Lockheed Martin (NYSE:LMT), the defense giant that makes everything from nifty spacecraft to ultra-pricey fighter planes, made headlines today with some jet-fueled earnings.

Compared to the prior-year quarter, revenues were up a slim 4%. Sales reached $8.4 billion. But earnings, as everyone is reporting, were up an astonishing 44% to $0.69 per share. How did the firm pull off such a feat? Tight cost controls and increased operating efficiencies?

Not exactly. Results in the prior-year quarter included some big charges, $0.24 per share in total. That means this year's $0.69 from operations could be considered a step back from last year's non-charge $0.72. Look at it however you like.

Yes, there were improvements worth noting. Information technologies revenues jumped 33% to become the fourth-biggest sales generator. Gross margins in aeronautics climbed by 0.9%, and the progress was 1.5% in space systems and 1.2% in integrated systems. But there was a slight slip in electronics systems.

In general, the firm seems to be executing well and profiting from a relatively generous defense budget, a situation that also holds benefits for Northrop Grumman (NYSE:NOC), General Dynamics (NYSE:GD), and Boeing (NYSE:BA).

Guidance for 2005 came in somewhat below the Street's expectations, with revenues predicted around $3.25 per share, representing earnings growth just 20%better than what's expected for 2004. If you're wondering why a slow giant that depends on government largesse is trading at a P/E ratio that matches its growth rate, the answer may be cash flow. The firm has put up a very healthy $2.4 billion in free cash flow so far this year.

The stock looks reasonably valued, and it has been a steady performer so far this year, outpacing the broader market. Just keep an eye open. Capital-intensive operations like these often mean that the shareholder's real payoff disappears into the land of negative free cash flow. Look back at a few years' worth of annuals to see. Should that happen, this slow grower will no longer look like such a bargain.

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Seth Jayson has positions in no company mentioned. View his stock holdings and Fool profile here. Fool rules are here.