Liabilities and Debt Financing

The following chart analyzes interest bearing debt as a percentage of market value of equity, looking at the amount of debt the company carries relative to the value of equity. From 2020 to 2024, Lockheed Martin consistently maintained the lowest interest-bearing debt to market value of equity ratio, ranging from 11% to 17%, signaling strong equity valuation and conservative use of debt. Northrop Grumman and RTX showed moderate leverage, with ratios generally in the 23% to 35% range, reflecting stable but more debt-reliant capital structures. Boeing, with the highest ratios, peaking at 50%, has relied heavily on debt, likely due to pressures in its commercial segment.

Here, interest bearing debt is analyzed as a percentage of total assets, which explains how much of a company's assets are financed through debt. Between 2020 and 2024, Lockheed Martin shows a steady rise in leverage, increasing from 24% to 38.5%, indicating a growing use of debt to finance its asset base. Northrop Grumman remains relatively stable in the 34%–37% range, reflecting consistent moderate leverage. Boeing has the highest ratio, exceeding 41% in 2020–2021, and gradually reduces it to 35% by 2024, however they still have the highest among competitors. RTX maintains the lowest leverage, fluctuating between 20% and 28%, suggesting a more conservative balance sheet. Lockheed starts to outpace it's competitors in 2024, after maintain the lowest leverage ratios, indicating increased debt use to fund it's assets .

The EBITDA/Interest Expense ratio measures the ability to cover interest payments using operating revenues. From 2020-2024, Lockheed Martin’s EBITDA-to-interest expense ratio declined from 16.9 to 8.1, indicating it still comfortably covers interest payments, but with a shrinking margin. Northrop showed similar movement, ending 2024 at 11.0, reflecting stable but tightening coverage. Boeing’s ratios remained weak throughout, falling into negative territory in 2020 and 2024, expressing continued pressure on its ability to meet interest obligations. RTX posted exceptionally high coverage ratios—over 235 in 2024—indicating strong earnings relative to debt costs. The negative value in 2020 reflects RTX's merger with Collin's Aerospace.

The CF from operations/interest expense measures how well a company can cover its interest payments, from the cash it generates from core operations. From 2020 to 2024, Lockheed Martin steadily declined from 13.85 to 6.73, indicating they still generate enough operating cash to cover interest, but with less buffer over time. Additionally, this indicates a higher interest burden or decreased operating revenue. Northrop Grumman remained fairly stable in the 5.7–7.3 range, indicating consistent but modest coverage. Boeing’s ratios were the weakest, with negative values in 2020 and 2024, highlighting periods when operating cash flow was not sufficient enough to cover interest payments. RTX posted exceptionally strong ratios, reaching over 131 in 2024, reflecting significant operating cash flow relative to interest costs. In 2020 they had a negative ratio, but again that was due to the Collin's Aerospace merger. 

A - Long term issue default rating

F1 - Short term issue default rating

Long term rating of A represents a low level of default risk relative to other issues or obligations in the same monetary union

F1 represents the strongest capacity of timely payments for financial commitments

Source: Fitch Ratings

BBB+ - Long term issue default rating

F2 - Short term issue default rating

BBB rating indicates moderate default risk relative to other issuers or obligations

F2 indicates a good capacity for timely payment of financial commitments

Source: Fitch ratings

BBB-  (Long Term issue default raiting)

F3 - Short term issue default rating

BBB- represents a moderate level of default risk, but is at higher risk of default than BBB or BBB+ 

F3 represents an adequate capacity for timely payment of financial commitments

Source: Fitch Ratings

BBB+ (Long term issue default rating)

A-2 - (Short term issue default rating)

BBB+ represents adequate capacity to pay long term obligations, but may weaken under economic conditions. 

A-2 represents satisfactory capacity, but more susceptible to changes in circumstances. 

Source: S&P Global