Why Lockheed Martin Stock Launched Higher
Key Points
Lockheed Martin exceeded all expectations for Q2 earnings.
With program losses behind it, Lockheed's profits more than quintupled.
Lockheed Martin (NYSE: LMT) stock surged ahead 9% through 1:22 p.m. ET Thursday after crushing on earnings this morning.
Analysts expected Lockheed to report $7.23 per share in profit on $19.4 billion in sales for Q2 2026. Instead, Lockheed earned $7.94 per share on $20.1 billion in sales -- and then raised guidance.
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Image source: Lockheed Martin.
Lockheed Martin Q2 earnings
Lockheed grew its sales 11% year over year, while profits surged an astounding 444%, rebounding from weak profits a year ago that were burdened by losses on "a classified program at Aeronautics" as well as a pair of helicopter programs for foreign customers. Sales increased in all four of the company's main business divisions, and year-ago losses at Aeronautics and Rotary and Mission Systems (those were the helicopter programs) were erased.
Free cash flow flipped from negative $150 million to positive $2.9 billion.
So you can understand why investors were pleased.
What's next for Lockheed Martin stock
Turning next to guidance, Lockheed kept the good news coming.
Full-year sales previously forecast to fall below $80 billion will now more likely approximate $80.8 billion, plus or minus $1 billion. Earnings will similarly be about $0.50 per share better than forecast -- between $29.95 and $30.65. Free cash flow for the year should range from $7 billion to $7.2 billion, also ahead of prior expectations.
All things considered, Lockheed is doing its darnedest to prove out my optimism about the stock. Although the shares still look a little pricey when valued on GAAP profit, the strong cash production has Lockheed stock trading for only about 16.5x free cash flow.
Between its 11% sales growth rate and near-3% dividend yield, I still believe Lockheed stock is cheap enough to buy,
Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.