Lockheed Martin Corp. (NYSE: LMT) experienced a sharp decline in its share price Tuesday, with premarket trading seeing a 7.2% drop, following the defense contractor’s announcement of significantly reduced second-quarter earnings. The downturn was primarily attributed to over $1.6 billion in program-related charges, causing results to fall short of Wall Street’s expectations.

The aerospace and defense giant reported revenue of $18.2 billion for the quarter, missing analysts’ consensus estimate of $18.54 billion and showing only a modest increase from the $18.1 billion recorded in the prior-year period. Net earnings plummeted to $342 million, or $1.46 per share, a substantial decrease from $1.6 billion, or $6.85 per share, reported a year ago. This decline was primarily driven by significant write-downs associated with various aerospace and helicopter programs. The consensus earnings estimate for the quarter stood at $6.42 per share.

Lockheed incurred a $950 million pretax charge on a classified Aeronautics program, citing identified cost overruns and performance issues. Additionally, the company incurred $570 million in losses associated with the Canadian Maritime Helicopter Program and $95 million related to Turkey’s utility helicopter program. An aggregate of $169 million in other charges, including an asset write-off linked to the U.S. Air Force’s Next Generation Air Dominance (NGAD) program, further compounded the financial pressure. In total, these specific items reduced earnings by $5.83 per share.

Despite the substantial losses, Chairman and Chief Executive Jim Taiclet offered reassurance to investors, emphasizing Lockheed’s integral role in supporting active global operations and highlighting the company’s long-term growth prospects. “Our F-35s, F-22s, PAC-3, THAAD, Aegis and many others…performed extremely well in the most crucial and challenging situations,” Mr. Taiclet stated. He added, “Based in part on this record of performance as well as the promise of several advanced technologies in development, our U.S. and allied customers are asking us to elevate and accelerate many key programs.”

A notable deterioration in cash generation mirrored the earnings hit. Cash from operations declined to $201 million for the quarter, a sharp drop from $1.9 billion a year prior. Free cash flow turned negative, registering at -$150 million, compared to a $1.5 billion inflow in the same period last year. Lockheed attributed this reduction to increased working capital requirements, including delayed customer payments and higher inventories within its Sikorsky unit.

Despite the weaker quarterly performance, Lockheed Martin maintained its full-year 2025 guidance, projecting sales of $73.75 billion to $74.75 billion and free cash flow between $6.6 billion and $6.8 billion. However, the diluted earnings per share (EPS) forecast was sharply reduced to a range of $21.70 to $22.00, down from the previous projection of $27.00–$27.30.

A segment-by-segment review revealed varied performance. Aeronautics revenue increased by 2% to $7.4 billion, driven by higher F-35 production volumes. However, the segment posted an operating loss of $98 million, following a significant classified program write-down. Missiles and Fire Control reported an 11% sales increase and delivered $479 million in operating profit, fueled by robust demand for tactical missile systems. Conversely, Rotary and Mission Systems revenue decreased by 12% to $4 billion, resulting in a $172 million loss for the segment due to helicopter program charges and lower production volumes. The Space segment recorded a 4% sales gain, reaching $3.3 billion, and a modest operating profit of $362 million, supported by growth in missile defense and civil space contracts.

While the quarterly performance unsettled investors, the company underscored the resilience of its backlog, global demand pipeline, and ongoing investments in next-generation technologies, such as the “Golden Dome for America.” Nevertheless, Tuesday’s stock decline reflects persistent market concerns regarding execution risks and potential margin pressures that may extend beyond the second quarter.

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