Security and Aerospace company Lockheed Martin (NYSE: LMT) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 4.5% year on year to $17.96 billion. The company expects the full year’s revenue to be around $74.25 billion, close to analysts’ estimates. Its GAAP profit of $7.28 per share was 14.7% above analysts’ consensus estimates.
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Lockheed Martin (LMT) Q1 CY2025 Highlights:
- Revenue: $17.96 billion vs analyst estimates of $17.76 billion (4.5% year-on-year growth, 1.1% beat)
- EPS (GAAP): $7.28 vs analyst estimates of $6.35 (14.7% beat)
- Adjusted EBITDA: $2.83 billion vs analyst estimates of $2.5 billion (15.7% margin, 13.1% beat)
- The company reconfirmed its revenue guidance for the full year of $74.25 billion at the midpoint
- EPS (GAAP) guidance for the full year is $27.15 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 13.2%, up from 11.8% in the same quarter last year
- Free Cash Flow Margin: 5.3%, down from 7.3% in the same quarter last year
- Backlog: $173 billion at quarter end, up 8.5% year on year
- Market Capitalization: $107.5 billion
"The momentum we created last year continued into the first quarter of 2025, with sales growing 4% year-over-year and free cash flow generation of $955 million. We continued investing in the business with over $850 million of research and development and capital expenditures in the quarter, and returned $1.5 billion to shareholders through dividends and share repurchases," said Lockheed Martin Chairman, President and CEO Jim Taiclet.
Company Overview
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.
Defense Contractors
Defense contractors typically require technical expertise and government clearance. Companies in this sector can also enjoy long-term contracts with government bodies, leading to more predictable revenues. Combined, these factors create high barriers to entry and can lead to limited competition. Lately, geopolitical tensions–whether it be Russia’s invasion of Ukraine or China’s aggression towards Taiwan–highlight the need for defense spending. On the other hand, demand for these products can ebb and flow with defense budgets and even who is president, as different administrations can have vastly different ideas of how to allocate federal funds.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Lockheed Martin grew its sales at a sluggish 3.3% compounded annual growth rate. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Lockheed Martin’s annualized revenue growth of 4.2% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak. 
Lockheed Martin also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. Lockheed Martin’s backlog reached $173 billion in the latest quarter and averaged 8.8% year-on-year growth over the last two years. Because this number is better than its revenue growth, we can see the company accumulated more orders than it could fulfill and deferred revenue to the future. This could imply elevated demand for Lockheed Martin’s products and services but raises concerns about capacity constraints. 
This quarter, Lockheed Martin reported modest year-on-year revenue growth of 4.5% but beat Wall Street’s estimates by 1.1%.
Looking ahead, sell-side analysts expect revenue to grow 4.5% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and indicates its newer products and services will not catalyze better top-line performance yet.
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Operating Margin
Lockheed Martin has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 12.3%.
Analyzing the trend in its profitability, Lockheed Martin’s operating margin decreased by 2.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.
In Q1, Lockheed Martin generated an operating profit margin of 13.2%, up 1.4 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Lockheed Martin’s flat EPS over the last five years was below its 3.3% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.
Diving into the nuances of Lockheed Martin’s earnings can give us a better understanding of its performance. As we mentioned earlier, Lockheed Martin’s operating margin improved this quarter but declined by 2.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.
For Lockheed Martin, its two-year annual EPS growth of 2.9% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.
In Q1, Lockheed Martin reported EPS at $7.28, up from $6.39 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Lockheed Martin’s full-year EPS of $23.15 to grow 20.6%.
Key Takeaways from Lockheed Martin’s Q1 Results
We were impressed by how significantly Lockheed Martin blew past analysts’ backlog expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 3.9% to $476 immediately after reporting.
Lockheed Martin had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
