Lockheed stock slips as profit drops, cash burn overshadows demand boom

Lockheed Martin Corporation reported weaker-than-expected first-quarter results, with profit declining and cash flow turning negative, even as demand for its weapons systems remains strong amid heightened geopolitical tensions.

The defense contractor posted quarterly profit of $1.49 billion for the period ended March 29, down from $1.71 billion a year earlier. Earnings per share came in at $6.44, missing analysts’ expectations of $6.74, according to FactSet.

Sales rose modestly by 0.3% to $18.02 billion but fell short of Wall Street estimates of $18.22 billion. Shares dropped 3.7% on Thursday's trading following the results.

Cash burn weighs on sentiment

Investor concerns were compounded by weaker-than-expected cash flow during the quarter.

Lockheed reported negative free cash flow of $291 million, driven in part by the timing of billings, as well as $1 billion in long-term debt repayments and $816 million in dividend payouts.

Despite the quarterly cash outflow, the company maintained its full-year forecast, projecting free cash flow between $6.5 billion and $6.8 billion in 2026.

The stock’s decline comes even as defense contractors broadly benefit from elevated global tensions, particularly in the Middle East.

However, rising costs tied to increased production and higher fuel prices have weighed on investor sentiment across the sector.

Segment performance mixed amid steady demand

Lockheed’s top-line performance reflected mixed trends across its business units.

Growth in its Missiles and Space divisions was partially offset by weaker volumes in its Aeronautics segment.

Chief Financial Officer Evan Scott attributed the muted sales growth to timing factors. “We expect sales to grow in the second quarter and throughout the remainder of the year, supporting our full-year growth outlook,” Scott says on a call with analysts.

The company continues to see robust demand for its defense systems. Earlier this month, Lockheed secured a $4.7 billion contract from the US government to accelerate production of Patriot interceptors, widely used by the US and its allies.

The agreement forms part of a broader plan to scale production of the PAC-3 MSE interceptor from 620 units last year to 2,000 annually by 2030, reflecting surging demand tied to ongoing geopolitical conflicts.

Investment push to boost production capacity

Chief Executive Officer Jim Taiclet said recent agreements with the Pentagon will enable the company to ramp up manufacturing capabilities.

"The deals Lockheed Martin inked with the Pentagon during the latest quarter will allow the defense contractor to continue increasing the scale and speed at which it delivers munitions," Taiclet says on a call with analysts.

With the new contracts, Lockheed plans to invest in robotics to enhance internal operations and strengthen its supply chain resilience.

"These munitions agreements provide risk mitigation for industry, and efficiency and speed for government," Taiclet says, adding that the company will continue to collaborate with the US government to address urgent needs. "We also remain committed to advancing emerging technologies," he says.

Looking ahead, Lockheed reaffirmed its full-year guidance, forecasting earnings in the range of $29.35 to $30.25 per share on revenue between $77.5 billion and $80 billion in 2026.

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