Revenue Recognition
Revenue Recognition
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Components of Revenue
Components of Revenue
Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, Space - (Left to Right)
Aeronautics
Net Sales
2024
$28,618M
2023
$27,474M
Operating Profit
2024
$2,523M
2023
$2,825M
The Aeronautics segment accounted for 40% of revenue in 2024 & 2023 representing a large portion of Lockheed's revenue, mainly coming from fighter jet sales. However, Lockheed recently lost the F-47 contract to Boeing which could harm their future revenue growth.
Missiles and Fire Control
Net Sales
2024
$12,682M
2023
$11,253M
Operating Profit
2024
$413M
2023
$1,541M
Missiles and Fire Control accounted for 17.8% of Revenue in 2024, and 16.6% in 2023. However, M&FC was more profitable in 2023, likely due to increased production expenses in 2024
Rotary and Mission Systems
Net Sales
2024
$17,264M
2023
$16,239M
Operating Profit
2024
$1,921M
2023
$1,865
Rotary and Mission Systems accounted for 24% of revenue in 2024 & 2023, and remains a staple in Lockheed's business model. With a large market share in the production of military helicopters and mission systems.
Space
Net Sales
2024
$12,479M
2023
$12,605M
Operating Profit
2024
$1,226M
2023
$1,158M
The Space segment accounted for 17.5% of revenue in 2024 and 18.6% in 2023. With an extensive portfolio of Space products and profitable operations Lockheed will continue to grow the space segment in the future.
Revenue By Geographic Location
Revenue By Geographic Location
As Expected Lockheed generates 73.9% of it's revenue in the United States through U.S. Government contracts. 3.7% of its revenue is generated in China, however, this may decrease over time as China implemented sanctions of many major U.S. defense contractors, over their arms deals with Taiwan.
Revenue Recognition
Revenue Recognition
Lockheed Martin recognizes revenue, based on the percentage of completion cost-to-cost measure of progress. Under the recognition method, Lockheed measures the progress towards completion based on the ratio of costs incurred to date, to the estimated total costs to complete the performance obligation. The method in which, they measure the costs is also known as an estimate-at-completion analysis. Profit is then estimated by the difference between total estimated revenues and total estimated cost at completion. Lockheed undergoes a complex auditing process, which requires significant estimations of contract sales and costs associated with it's contracts.
In order to accurately estimate costs and revenues, Lockheed monitors and assess the effects of contract risks on it's estimates of sales and and total costs to complete the contract. Lockheed may book hire profits if they are able to retire risk surrounding the technical, schedule and cost aspects of the contract, which can decrease the estimated total costs to complete the contract.
Vertical Analysis
Vertical Analysis
Summary of Analysis:
Summary of Analysis:
Lockheed Martin's cost structure has shifted in the wrong direction, with COGS rising from 86.73% in 2020 to 90.12% in 2024, reducing Gross Profit from 13.27% to 9.88%. Operating Income has also declined from 13.57% to 10.11%, reflecting higher costs. Additionally, Net Interest Expense has increased from -0.90% to -1.46%, indicating rising debt servicing costs. As a result, Net Income to the Company has fallen from 10.45% to 7.51%, signaling a profitability squeeze. Managing costs and improving operational efficiency will be critical moving forward.
Competitor Analysis
Competitor Analysis
The vertical analysis of Boeing's financials reveals a company facing significant challenges related to cost management, profitability, and financial leverage. The consistently high COGS, rising operating expenses, substantial interest burden, and persistent net losses are alarming for the company's long-term sustainability.
Quality of Earnings
Quality of Earnings
Lockheed Martin’s cash flow-to-net income ratio consistently exceeds 1.0, ranging from 1.18 to 1.53, indicating strong earnings quality. This suggests that reported profits are well-supported by actual cash flow, reducing the risk of earnings manipulation. The upward trend signals improved cash generation, reinforcing financial stability.
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