Lockheed Martin's stock declines amid guidance for slimmer cash flow

[Air Force F-35 Joint Strike Fighter]
Michael Fitzsimmons/iStock Editorial via Getty Images

Lockheed Martin (NYSE:LMT [https://seekingalpha.com/symbol/LMT]) shares dropped as much as 4.6% on Tuesday, marking their sharpest intraday decline since July, after the defense giant lowered its full-year free cash flow guidance, overshadowing stronger-than-expected quarterly earnings.

The company now expects about $6.6 billion in free cash flow for 2025, tightening its prior forecast of $6.6 billion to $6.8 billion, and slightly above analysts’ consensus estimate of $6.53 billion. The revised outlook suggests more conservative cash generation in the final months of the year, even as defense spending remains robust.

[Lockheed Martin earnings surprise and estimates by quarter]
Lockheed Martin earnings surprise and estimates by quarter (Seeking Alpha)

Lockheed (NYSE:LMT [https://seekingalpha.com/symbol/LMT]) posted third-quarter adjusted earnings of $6.95 per share, beating expectations of $6.35, with GAAP earnings also at $6.36 per share. Sales rose 9% year over year to $18.6 billion, topping forecasts of $18.52 billion, fueled by solid performance in the company’s aeronautics and missile programs.

Operating cash flow reached $3.7 billion versus estimates of $3.47 billion, while free cash flow totaled $3.3 billion, surpassing the expected $3 billion and improving significantly from a year earlier.

Lockheed (LMT [https://seekingalpha.com/symbol/LMT]) returned $1.8 billion to shareholders through dividends and buybacks during the quarter, raised its quarterly dividend by 5% to $3.45 per share, and expanded its share repurchase authorization by $2 billion, bringing the total to $9 billion. The company also reported a record $179 billion backlog, representing more than two years of future revenue.

Chief Executive Jim Taiclet highlighted progress in key defense programs, noting major contract wins for the CH-53K heavy-lift helicopter and PAC-3 MSE missile system, as well as finalization of F-35 Lots 18 and 19 early in the fourth quarter. Lockheed (LMT [https://seekingalpha.com/symbol/LMT]) delivered a record 143 F-35 jets year to date and continues to invest in expanding production capacity.

Looking ahead, the company reaffirmed its 2025 sales forecast of $74.25 billion to $74.75 billion and lifted its earnings guidance to $22.15 to $22.35 a share.

Despite the strong performance, the more cautious free cash flow outlook weighed on sentiment, sending shares lower in early trading.

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