Lockheed Martin Exceeds Q1 2025 Expectations Amid Market Challenges
Lockheed Martin (NYSE: LMT) recently released its first-quarter 2025 results, outperforming analysts’ expectations in both revenue and earnings. The company reported an impressive revenue of $18.0 billion and adjusted earnings per share of $7.28, surpassing consensus estimates of $17.8 billion and $6.30, respectively. This strong performance stemmed from increased sales in tactical and strike missile programs, along with enhanced profitability. Additionally, Lockheed Martin reaffirmed its financial outlook for the entire year of 2025.
In response to the favorable earnings announcement, LMT’s stock price rose by 3% during pre-market trading. However, concerns over tariffs led to a decline later in the day. Despite a year-to-date return of -5% in 2024, LMT has slightly outperformed the S&P 500 index, which has seen a decline of 12%. Ongoing geopolitical tensions, particularly the Russia-Ukraine conflict and Middle Eastern issues, have sparked investor interest in select defense stocks. For those seeking a smoother investment than individual stocks, the High-Quality Portfolio, boasting over 91% returns since its inception, may be a fitting alternative.
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Lockheed Martin’s Q1 Performance Overview
Lockheed Martin’s revenues for Q1 totaled $18.0 billion, reflecting a 4% increase compared to the previous year. Analyzing the performance by segment, the Missiles and Fire Control (MFC) division showed the highest growth, with a notable 13% rise in sales propelled by increased production of missile programs, such as the Long Range Anti-Ship Missile (LRASM) and Joint Air-to-Surface Standoff Missile (JASSM). The Aeronautics segment also saw a 3% increase in sales, driven primarily by higher volumes from the F-35 production contract. In addition, the Rotary & Mission Systems (RMS) segment achieved a 6% sales increase, aided by heightened volumes on the Canadian Surface Combatant (CSC) and radar programs. Conversely, the Space segment faced a 2% revenue decline due to reduced volume in the Next-Generation Overhead Persistent Infrared program.
Lockheed Martin’s operating margin improved by 140 basis points to 13.2% in the first quarter, contributing to a bottom line of $7.28 per share, which marks a 15% year-over-year increase. Looking forward, the company reaffirmed its sales outlook for 2025, projecting full-year revenues of $74.25 billion and an earnings per share of $27.15 at the midpoint of its guidance.
Implications for LMT Stock Performance
After a robust first-quarter performance and the reaffirmation of its 2025 financial outlook, Lockheed Martin’s stock experienced a positive reaction following the earnings announcement. However, a review of its stock performance over the past four years shows mixed results. In 2021, the stock returned 3%, followed by a strong 40% rise in 2022. Yet, it saw a decline of -4% in 2023 and a modest increase of 10% in 2024, with its overall volatility reflecting that of the S&P 500.
In contrast, the Trefis High Quality (HQ) Portfolio, which comprises 30 stocks, demonstrated less volatility and has significantly outperformed the S&P 500 during the last four years. This superior performance can be attributed to the HQ Portfolio’s stocks yielding better returns with decreased risk than the benchmark index, resulting in a more stable investment experience.
Given the current uncertain macroeconomic environment, characterized by tariffs and ongoing geopolitical tensions, one must consider whether LMT might face underperformance against the S&P 500 in the coming year. This scenario harmonizes with experiences from 2021, 2023, and 2024. Nevertheless, Lockheed Martin’s recent strong performance suggests potential for continued growth. Current trading shows a P/E ratio of 16x its trailing earnings, which is below its five-year average P/E of 18x. Furthermore, potential increases in defense budgets, particularly under a possible Trump administration, could favor defense contractors like LMT. Thus, even with recent stock gains, we believe that investors can expect solid long-term returns by investing in LMT stock.
As LMT looks poised for further growth, it may also be beneficial to explore how Lockheed Martin’s peers measure up against important metrics. Additional comparisons for various companies across industries can be found at Peer Comparisons.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
