Lockheed Martin’s third quarter was met with a negative market reaction despite revenue aligning with Wall Street expectations and GAAP earnings surpassing analyst estimates. Management attributed the quarter’s performance to robust demand across major defense programs, highlighted by significant contract wins in missile systems, advanced aircraft, and space-based interceptors. CEO James Taiclet emphasized the company’s operational execution, pointing to a record backlog and growing international orders. However, management adopted a cautious tone regarding ongoing risks in certain classified and fixed-price development programs, noting efforts to address legacy challenges and stabilize margins.
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Lockheed Martin (LMT) Q3 CY2025 Highlights:
- Revenue: $18.61 billion vs analyst estimates of $18.55 billion (8.8% year-on-year growth, in line)
- EPS (GAAP): $6.95 vs analyst estimates of $6.36 (9.3% beat)
- Adjusted EBITDA: $2.46 billion vs analyst estimates of $2.60 billion (13.2% margin, 5.4% miss)
- The company slightly lifted its revenue guidance for the full year to $74.5 billion at the midpoint from $74.25 billion
- EPS (GAAP) guidance for the full year is $22.25 at the midpoint, beating analyst estimates by 1.7%
- Operating Margin: 12.3%, in line with the same quarter last year
- Backlog: $179.1 billion at quarter end, up 8.1% year on year
- Market Capitalization: $112.7 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Lockheed Martin’s Q3 Earnings Call
- Douglas Harned (Bernstein): asked about the company’s ability to sustain margin improvements after resolving legacy program risks. CEO James Taiclet described efforts to “put every risk that we can quantify behind us,” but cautioned that technical risks remain.
- Seth Seifman (JPMorgan): pressed for more detail on growth expectations for next year given backlog strength. CFO Evan Scott indicated new opportunities may emerge, especially around munitions and homeland defense, but said more clarity would come in January.
- Ken Herbert (RBC Capital Markets): questioned supply chain readiness to support increased production in missile and munitions programs. Management said it is “much more confident” in supplier commitments but acknowledged the need for daily oversight and continued investment.
- Scott Deuschle (Deutsche Bank): sought clarification on weaker guidance in the rotary segment and whether lost volume would be recovered. Scott confirmed CH-53K helicopter production was the main factor and that scaling efforts are underway for next year.
- Kristine Liwag (Morgan Stanley): inquired about F-35 Lot 18 and 19 contract margins and pricing. CFO Evan Scott said the shift to firm fixed-price contracts offers potential for margin improvement, especially as production processes stabilize.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will closely monitor (1) Lockheed Martin’s ability to scale production and address supply chain constraints for missile and aerospace programs, (2) progress on F-35 Block IV upgrades and international order expansion, and (3) the impact of new contract awards—particularly in missile defense and space systems—on backlog and revenue growth. Developments in government defense budgets and the Golden Dome homeland defense initiative will also be key indicators.
Lockheed Martin currently trades at $485.74, down from $505.90 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).
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