Missile Wins Can't Offset Margin Collapse, Lockheed Martin Tumbles After Q2 Report

Lockheed Martin Corp. (NYSE:LMT) shares traded lower Tuesday after the defense giant delivered mixed second-quarter 2025 results.

Hefty program charges overshadowed Lockheed Martin’s results, cutting into margins and sharply reducing GAAP profits.

The company reported net sales of $18.16 billion, marginally missing the Street estimate of $18.63 billion, while adjusted earnings per share of $7.29 topped the consensus forecast of $6.63.

GAAP EPS plunged to $1.46, down from $6.63 a year ago, as the company absorbed $1.6 billion in pre-tax charges tied to performance issues in legacy programs.

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Segment And Margin Performance

Aeronautics sales rose to $7.42 billion from $7.28 billion. Missiles and Fire Control generated $3.34 billion, up from $3.10 billion.

Rotary and Mission Systems fell to $3.995 billion, down from $4.55 billion. Space sales increased to $3.31 billion from $3.19 billion.

Lockheed saw sharp margin compression across the board. Aeronautics margin dropped to -1.3% from 10.3%, hit by a classified program loss. Missiles and Fire Control margin slipped to 14.0% from 14.5%, Space edged down to 10.9% from 10.8%, and Rotary and Mission Systems swung to -4.3% from 10.9%. Overall, consolidated operating margin dropped to 4.1%, compared with 11.9% a year earlier.

Lockheed Martin generated $201 million in operating cash flow and reported negative $150 million in free cash flow for the quarter.

The total backlog stood at $166.53 billion at the end of the quarter.

The company returned $1.3 billion to shareholders during the quarter through dividends and share repurchases.

Outlook

Lockheed Martin revised its full-year 2025 GAAP EPS guidance to $21.70–$22.00, down from $27.00–$27.30, compared with a consensus estimate of $27.37.

It reaffirmed its sales outlook of $73.75 billion—$74.75 billion, versus an expected $74.41 billion.

The company expects Business segment operating profit of $6.6 billion-$6.7 billion (prior $8.1 billion-$8.2 billion) and Free cash Flow of $6.6 billion-$6.8 billion (unchanged).

Lockheed Martin CEO Jim Taiclet said the company’s platforms—including the F‑35, F‑22, PAC‑3, THAAD, and Aegis—have proven powerfully effective in combat and deterrence roles.

“Several allied nations announced new F‑35 purchases, the U.S. Army awarded over $1 billion in missile contracts, and the Space Force expanded its GPS IIIF satellite orders,” he noted, adding that the Army’s early award of substantial missile funding underscores rising demand.

Taiclet acknowledged that charges tied to legacy programs resulted from a recent review—”necessary steps to improve execution.”

He highlighted Q2’s solid momentum, with sequential sales growth, $800 million invested in innovation and infrastructure, and $1.3 billion returned to shareholders. With 2025 sales and cash‑flow guidance intact, the company is now focused on scaling emerging technologies and delivering advanced defense solutions that will support peace and security for decades to come.

Price Action: LMT shares were trading lower by 6.02% at $432.79 at the last check Tuesday.

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