Profitability Analysis

With an ROE of 113.17%, Lockheed had a strong 2020 and COVID had little impact on financial health. Cited in the 10-K they cited experiencing coronavirus related costs, supplier delivery delays, travel restrictions, site access and quarantine restrictions, and adjusted work from home schedules. Despite the challenges, they cited their strong performance as a result of favorable government contract timing, strong operational performance, and lower travel and overhead expenditures. In turn, they had a high Net Profit Margin, strong total asset turnover, and a higher level of leverage. With an equity multiplier of 8.40, Lockheed was more reliant on debt financing through this period to fund its assets. 

While ROE decreased just under 50% in 2021 from the previous, Lockheed remained profitable in 2021. One of the main drivers behind the decrease is a $4.9 billion increase in Total Stockholder's Equity, which was larger driven by an increase of dividend payments from $0.20  a share to $2.80 a share, noted in their 10-K. On top of that strong financial performance led to an increase in Total Stockholder's Equity. The Net Profit Margin also decreased from 2020, but remained strong and they had a higher Total Asset Turnover in 2021 indicating larger earnings on assets. Lastly, they cut their equity multiplier in half from 2020, leading to less reliance on debt financing. 

In 2022 Lockheed saw a 7.4% increase in ROE, however saw a decrease in Net Profit Margin, Total Asset Turnover and Increase in Equity Multiplier. It is worth noting that Total Stockholders Equity decreased around $1.7 billion, and when companied with a higher equity multiplier, Lockheed saw an increase in ROE. In the 10-K Lockheed noted continuing COVID pressures similar to the ones cited in 2020, and mentioned Inflationary pressures which impacted their labor rates and suppliers signaled inflation related cost pressures. In relation to their contracts business, Lockheed noted that they plan on pricing in heightened levels of inflation into their contracts, and in some cases are seeking to include economic price adjustment clauses. Lastly, in the 10-K Lockheed cited the Russian invasion of Ukraine as having impact on company financials. Lockheed mentioned an increased interest in their products and services, and additional & potential future orders for products and services. However, Lockheed noted that the economic sanctions and export controls ordered against Russia can indirectly effect their supply chain and access to resources. 

In 2023 ROE returned to triple digits reaching 101.24%. With increases in key profitability measures such as Net Profit Margin, Return on Assets, and Gross Profit Margin. Lockheed also saw an increase in Total Asset Turnover, and a higher Equity Multiplier, citing increased levels of debt financing. Lockheed's ROE growth can be attributed to higher net earnings up $1.2 billion from 2022, and share repurchases, as noted in the 10-K. Coupled with strong contract revenues and increased demand for products from the U.S. and its allies, Lockheed remained its consistantly high profitability levels in 2023. 

While ROE maintained strong levels at 84.26%, Lockheed saw a decline from the previous year, indicating a less profitable year than 2023. Noted in the 10-K Lockheed mentioned a $16 billion increase in backlog from 2023, which is revenue they can not recognize just yet, which can effect total revenues and therefore impact profitability metrics. GPM is a major component of ROE which was also down from the previous year, indicating a less profitable fiscal year. On the contrary, Lockheed is still financially solid, and in the 10-K noted 73% of their $71 billion in revenues came from U.S. Government contracts. Lockheed has a profound ability to effectively utilize its assets and the size of their contract revenues allows them to maintain financial strength. It's worth noting Lockheed had it's lowest Net Profit Margin in the last 5 years, a strong total asset turnover ratio, and an equity multiplier of 8.78 marking a 5 year high. While they were able to generate sufficient revenues, it appears to be at the helm of debt financing, similarly to 2020.