Lockheed Martin, the world’s largest defense contractor and manufacturer of the F-35 fighter jet, saw its second-quarter profits tumble nearly 80%, driven by $1.6 billion in pre-tax charges across several of its programs. The news, first reported by the Financial Times, sent the company’s shares down 8% in pre-market trading on Tuesday.
The U.S. defense giant posted net earnings of $342 million, or $1.46 per share, in the quarter ending June 30—down sharply from $1.64 billion, or $6.85 per share, in the same period a year ago. Revenues held mostly flat at $18.2 billion, but the company reported negative free cash flow of $150 million, raising further concerns among investors.
Lockheed sharply cut its full-year earnings forecast, now expecting earnings per share to range between $21.70 and $22.00, down from an earlier projection of up to $27.30.
The steep losses were largely attributed to problems in Lockheed’s aeronautics division, which absorbed a $950 million charge related to a classified program. The company also took a $57 million hit from its work on maritime helicopters for the Canadian government.
CEO Jim Taiclet said a company-wide review had uncovered “new developments that caused us to re-evaluate the financial position on a set of major legacy programmes,” prompting multiple charges to reflect those risks.
Despite ongoing geopolitical conflicts in Ukraine and the Middle East that have generally boosted defense spending in the West, Lockheed and other contractors have struggled with the impact of inflation and cost overruns, especially on fixed-price contracts.
Robert Stallard, an analyst at Vertical Research Partners, told clients that the disappointing results would likely “deepen the already negative investor sentiment towards the stock.” He noted that Lockheed has been on a “losing streak,” pointing to the recent resignation of its chief financial officer and a major loss to Boeing for the U.S. military’s next-generation stealth fighter project.
“While the programme charges are bad enough, the significant shortfall on free cash flow is also a worrying sign of operational headwinds,” Stallard added.
The company’s weak performance and revised outlook are expected to intensify scrutiny from shareholders and industry analysts alike, as Lockheed faces mounting pressure to regain financial and operational stability in an increasingly competitive and volatile global defense market.
