In what few would argue has been a year when very few businesses could have expected to come out on top producing further earnings and cash flow progress it is both surprising and somewhat disappointing to see Lockheed Martin shares marked down in early afternoon trading in New York.
Led by innovation and putting the customer first, Lockheed Martin has today confirming progress across all four of its divisions, cash flow from operations increasing to $8.2 billion and that the company ended the year with a record order backlog of £147.1 billion. Important too is that in respect of guidance the company told investors that it expected an increase in revenue, profits and cash flow expectations for 2021 above the previous guidance level announced last October.
That the Q4 result itself may have been a touch lower than some analyst expectations should not have surprised. Lockheed Martin has not been immune for the impacts of C-19 and we already knew that it had, due to staff illness, missed its earlier expectation for final 2020 F-35 Joint Strike Fighter delivery guidance. These are excellent results all round and six months into his new role as CEO, Jim Taiclet deserves praise for keeping everything on target in what has surely been the most difficult nine- month period that anyone can remember. That he inherited a strong organisation that had an excellent forward strategy from Marillyn Hewson will not have been lost but, faced with the enormity of the C-19 situation, Taiclet has done extremely well to keep everything not only on course but in a position to further extend growth.
Bottom line is that throughout 2020, Lockheed Martin has navigated its way through varied geopolitical, business, and health challenges in order to deliver not only excellent results for investors but importantly, for its customers in an efficient and affordable way.
In respect of financial details, net sales in FY 2020 were $65.4 billion, versus $59.8 billion in FY2019, an increase of 9 percent over last year. All four business areas achieved high-water marks for sales in 2020 and even in the most difficult fourth quarter period, net sales of $17 billion were reported by the company compared to $15.9 billion in Q4 2019.
FY2020 was a great year for new orders received and Lockheed Martin ended the year having added $68.1 billion of orders through the year and which led to the company being able to record a record year-end backlog of $147.1 billion.
Net earnings from continuing operations for FY2020 were approximately $6.9 billion, or $24.50 per share, compared to $6.2 billion, or $21.95 per share, in FY2019. Lockheed Martin recorded net earnings from continuing operations of $1.8 billion in Q4 ($6.38 per share) compared to $1.5 billion ($5.29 per share) in Q4 2019.
Business segment operating profit of $7.2 billion for 2020 was a record – up 9 percent versus that reported in FY2019 and for the Q4 period business segment operating profit was $1.9 billion – a 14 percent increase over that of the Q4 2019 period result.
The company has a very long record of achieving strong cash generation and last year was no exception. In total, Lockheed Martin generated a record $8.2 billion cash from operations in FY2020 – this after making discretionary pension contributions of $1 billion. This compares with cash from operations of $7.3 billion in FY2019 (after discretionary pension contributions of $1 billion) and during the year the company returned around $3.9 billion of cash to stockholders through payment of cash dividends to investors totalling $2.8 billion and repurchasing 3 million shares at a cost of $1.1 billion.
Operational Highlights
Aeronautics earned a nearly $1.3 billion contract to support operations and sustainment of the global F-35 fleet. The contract ensures that the F-35 remains equipped to accomplish our customers’ most important missions.
Missiles and Fire Control successfully conducted its fourth, fifth, and sixth captive-carry flight tests of the hypersonic AGM-183A Air-Launched Rapid Response Weapon (ARRW). These tests, conducted alongside the U.S. Air Force customer, serve as a precursor for additional testing over the next two years.
Rotary and Mission Systems won multiple contracts for classified programs with a total value of $195 million. These programs will ensure that our customers have a clear advantage as they take on the threats of the 21st century.
Space played a significant role in the NASA OSIRIS-REx Touch-And-Go sample collection event on Oct. 20. The spacecraft, which is built and operated by the Space team, collected and stowed a crucial sample of material from asteroid Bennu and will begin its journey back to Earth in spring 2021.
So, in a nutshell, another great year and one that ended once again on a very positive note. The future looks very bright and while a degree of uncertainty must remain in respect of how the C-19 pandemic may further impact on performance, confidence for the year ahead should in my view remain very high.
CHW (London – 26th January 2021)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785