Lockheed Martin (LMT): Revenue +5.14%, Net Income -22.83% — Capital Allocation Under Pressure

Revenue rose to $71.04B while net income plunged — the immediate tension#

Lockheed Martin [LMT] closed FY2024 with revenue of $71.04B (+5.14% YoY) and net income of $5.34B (-22.83% YoY), creating a sharp contrast between top-line momentum and bottom-line pressure. The company generated EBITDA of $8.82B but reported a significant fall in net earnings compared with FY2023's $6.92B, a swing that demands investigation into margin mix, one-time items, and non-operating drivers. At a market price of $444.82 and a market capitalization near $103.85B, Lockheed's growth story is now being weighed against heavier cash-return programs and rising leverage, a combination that amplifies strategic tradeoffs for management.

These headline moves matter because they reveal how Lockheed is translating defense revenue strength into shareholder returns. Revenue expansion has been steady, aided by program deliveries and backlog execution, yet profitability and cash conversion have weakened compared with prior years. The juxtaposition of incremental revenue growth and a double-digit decline in net income raises questions about margin drivers, capital allocation discipline, and the balance-sheet consequences of aggressive buybacks and dividends.

This article recalculates key metrics from Lockheed's FY2024 financials (filed 2025-01-28) and the most recent quarterly disclosures to show where performance is structural versus episodic, to quantify capital allocation choices, and to place management's actions into a measurable financial context. All ratio calculations below are derived from the provided FY2024 income statement, balance sheet and cash flow line items unless otherwise noted.

Financial performance: growth, margins and cash flow analyzed#

Lockheed's FY2024 revenue of $71.04B represents a YoY increase of +5.14% versus $67.57B in FY2023 (calculated as (71.04 - 67.57) / 67.57 = +5.14%). Gross profit in FY2024 was $6.93B, yielding a gross margin of 9.75% (6.93 / 71.04 = 9.75%), while operating income of $7.01B produced an operating margin of 9.87%. Net margin fell to 7.51% (5.34 / 71.04 = 7.51%), a material contraction from FY2023's 10.24% level.

The decline in net income (from $6.92B in 2023 to $5.34B in 2024) equals a -22.83% change (calculated as (5.34 - 6.92) / 6.92 = -22.83%). This gap between revenue growth and EPS compression suggests either one-off charges, higher interest or tax expense, or adverse mix and program effects reducing reported profitability. EBITDA of $8.82B provides a useful operating cash proxy but the conversion of EBITDA into net income and free cash flow has become less efficient year-over-year.

Free cash flow (FCF) is an important lens for Lockheed because of its capital return commitments. FY2024 free cash flow was $5.29B, down from $6.23B in FY2023, translating to an FCF margin of 7.45% for 2024 (5.29 / 71.04 = 7.45%) versus 9.22% in 2023. Operating cash flow of $6.97B versus net income of $5.34B indicates positive quality of earnings in terms of cash generation, but the step-down in FCF highlights rising uses of cash in financing and investing activities.

Table: Income Statement Trends (2021–2024)

The table shows that gross and operating margins compressed in 2024 compared with the 2021–2023 period. While revenue reached a record level, margins — especially gross margin — moved materially lower, indicating either program cost pressure, change in program mix toward lower-margin work, or discrete charges that impacted cost of revenue.

Capital allocation: dividends, buybacks, debt and the funding mix#

Capital allocation is the central strategic story for FY2024. Lockheed returned $3.06B in dividends and repurchased $3.70B of common stock in FY2024, for combined cash returns of $6.76B. With free cash flow of $5.29B, cash returns exceeded free cash flow by $1.47B (5.29 - 6.76 = -1.47), which required funding from other sources.

During FY2024 Lockheed's total debt rose to $20.27B from $17.46B in FY2023 (a net increase of $2.81B), while cash at year end was $2.48B. Net debt therefore stood at $17.79B (20.27 - 2.48 = 17.79). Calculated on FY2024 EBITDA of $8.82B, net debt / EBITDA equals +2.02x (17.79 / 8.82 = 2.02x). This is materially different from a lower net-debt metric presented elsewhere in the data set; the reconciled, balance-sheet-based calculation demonstrates that Lockheed entered FY2025 with a leverage profile near two times EBITDA when measured on FY2024 EBITDA.

The company's dividend per share TTM is $13.05 and the key metrics show EPS TTM roughly $18.00, which produces a dividend payout ratio on an EPS basis of about 72.50% (13.05 / 18.00 = 72.50%). Calculated on cash flow, dividends paid of $3.06B represent 57.25% of FY2024 net income (3.06 / 5.34 = 57.25%). The coexistence of a high cash payout, continued repurchases and rising net debt creates an important trade-off between returning capital now and preserving balance-sheet flexibility for program tailwinds or downturns.

Table: Balance Sheet & Cash Flow Snapshot (2023–2024)

The balance-sheet snapshot highlights several structural points: equity declined, total liabilities rose faster than assets, and net debt increased. Share repurchases were reduced from $6.0B in 2023 to $3.7B in 2024, but combined with dividends they still outpaced free cash flow.

Earnings quality and recent beats: a closer look at quarterly cadence#

Lockheed has shown a string of reported beats in 2025 quarters within the dataset: actual EPS prints exceeded consensus in multiple recent quarters (for example, reported results of 7.67, 7.28 and 7.29 versus estimates of 6.62, 6.34 and 6.52 respectively). Those quarterly beats reflect execution on large programs and timing benefits, yet annual net income contraction shows the difference between quarterly operational execution and full-year profitability impacts such as higher interest, tax adjustments, or year-end program accounting.

Quality-of-earnings analysis must therefore reconcile robust quarterly performance with FY2024's profit deterioration. Operating cash flow of $6.97B versus net income of $5.34B remains healthy, suggesting non-cash items are not masking profitability entirely; however the drop in FCF and higher net debt indicate cash was deployed to shareholders rather than retained as buffer. The net change in working capital (-$1.66B) and the rise in long-term debt (from $17.29B to $19.63B) show funding to smooth cash timing or to finance capital returns.

Competitive positioning and program mix: why margins compressed#

Lockheed's revenue base is anchored in locked-in, high-volume defense programs and long-term contracts. That durability supports predictable revenue but can hide margin variability driven by program mix, escalation clauses, and cost-to-complete assumptions. FY2024's lower gross margin (9.75% vs 12–13% in earlier years) points to either program-level cost pressure, changes toward lower-margin work, or discrete cost adjustments at the contract level.

In a sector where program execution and supplier costs can swing margins, Lockheed's scale and backlog remain a competitive moat. However, the margin contraction narrows the gap between Lockheed and peers on operating efficiency metrics and increases the importance of execution discipline and contract pricing on future results. The company’s forward-looking EPS estimates in the dataset show analyst consensus expecting EPS growth in coming years (e.g., estimated EPS of 22.49 for 2025 and rising thereafter), which implies expectations of margin recovery or leverage on higher revenue.

Data inconsistencies and transparency: reconciling conflicting metrics#

The dataset contains several internal discrepancies that warrant explicit acknowledgment. For example, a net-debt-to-EBITDA figure listed elsewhere in the materials is 0.24x, while a balance-sheet-based calculation using FY2024 net debt ($17.79B) and FY2024 EBITDA ($8.82B) yields +2.02x. Similarly, a reported current ratio TTM of 0.98x contrasts with a year-end current ratio calculated from current assets ($21.85B) and current liabilities ($19.42B) of 1.13x. Return-on-equity values also differ when calculated from year-end equity and reported net income: NY-end ROE (5.34 / 6.33) = 84.31%, whereas a TTM ROE figure elsewhere shows 65.82%.

These divergences likely reflect different denominators (TTM vs year-end, pro forma adjustments, or trailing vs single-year measures) and indicate the importance of consistent measurement windows. For this analysis, I use year-end FY2024 balance-sheet figures and the FY2024 income statement to compute the ratios presented above and explicitly note where TTM metrics in the dataset differ. Investors should reconcile the periods used before drawing conclusions from headline ratios.

Strategic implications and management credibility#

Management faces a clear allocation choice: sustain high cash returns (dividends + buybacks) or prioritize balance-sheet repair and reinvestment for margin recovery. The FY2024 numbers show management elected to return substantial cash to shareholders even though free cash flow did not fully cover total cash returns, funding the gap with debt and working-capital movements.

This allocation is defensible when access to low-cost capital is available and when management believes repurchases and dividends will deliver more value than investing marginal dollars into program execution or M&A. But the decision increases sensitivity to any downturn in program funding, supplier inflation, or unforeseen program charges. Management's recent string of quarterly beats supports execution credibility on core programs, yet the FY2024 profit decline signals that operational discipline must improve to sustain the current return profile without adding financial risk.

What this means for investors#

Investors should view Lockheed's FY2024 results as a study in trade-offs. The company delivered revenue growth (+5.14%) and continued strong operating cash generation, but experienced material net income compression (-22.83%), weaker free cash flow margin (7.45%) and an increase in net leverage (net debt / EBITDA ≈ +2.02x). The combination of elevated shareholder returns and rising net debt tightens the margin for error on program execution.

If program margins and working capital normalize, Lockheed’s established backlog and recent quarterly beats suggest earnings and cash flow can recover, supporting continued shareholder returns. Conversely, sustained cost pressures or contract-level losses would force a rebalancing of returns vs. deleveraging. For investors, the critical near-term indicators to watch are sequential margin expansion, free cash flow conversion versus stated capital-return policy, and management commentary on program cost-to-complete and working-capital trends in upcoming earnings calls.

Key takeaways#

Lockheed grew sales to $71.04B (+5.14%) in FY2024 but saw net income fall to $5.34B (-22.83%), compressing net margin to 7.51%. Free cash flow of $5.29B was strong but insufficient to cover combined dividends and repurchases of $6.76B, resulting in a net-debt position of $17.79B and a net debt/EBITDA ratio of +2.02x (FY2024 basis). Management continues to return capital aggressively while operating margins and balance-sheet leverage have become the primary variables determining risk. Recent quarterly beats show operational execution remains a strength, but the FY2024 full-year picture highlights the need for margin recovery and careful capital-allocation signaling going forward.

Conclusion#

FY2024 left a mixed scorecard for Lockheed Martin: reliable revenue growth and continued cash-generation capability paired with margin deterioration and a funding gap between cash returns and free cash flow. My recalculated ratios underscore a meaningful increase in leverage when measured on FY2024’s reported EBITDA and a high dividend payout ratio in EPS terms (≈72.50%). Management's capital-allocation choices are the defining strategic action for now; they have preserved shareholder distributions but at the cost of balance-sheet headroom. The investment story is therefore conditional: Lockheed's defense franchise and contract backlog remain durable competitive advantages, but sustaining that franchise while maintaining aggressive cash returns requires demonstrable margin improvement and disciplined working-capital management.

What to watch next: sequential changes in gross and operating margins, the cadence of free cash flow versus total shareholder returns, and management’s commentary on program-level cost drivers and backlog profitability. Those will determine whether FY2024's margin compression was a transitory synchronization issue or an early sign of structural pressure in the company's program portfolio.

(Analysis anchored in Lockheed Martin FY2024 financial statements provided; all ratios and percentage changes in this article are independently calculated from the supplied income statement, balance sheet and cash flow line items.)