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Executive Summary
Based in Bethesda, Maryland, Lockheed Martin is a technology, security, and innovation leader
that engineer’s world class products and solutions for customers worldwide. By offering cutting edge
technologies, products and value to a range of customers both domestic and abroad, from the U.S.
Department of Defence, to other governments, and to the private sector, it allows the company itself to
grow in market share and profit. It offers an advanced fighter jets such as F-35 Lightning II, missile
defence system, security solutions and space exploration technologies. Lockheed Martin are one out of
the largest defence contractors globally, that is why they help to shape national security and military
strategy around the world.
Lockheed Martin showed a strong financial performance in 2023 increasing 10 % compared to
the last year. In particular, strong demand for defence systems, such as the growth in advanced fighter
aircraft and missile defence technologies, yielded most of this growth. The company was able to
navigate challenges such as supply chain disruptions, inflationary pressures and geopolitical tensions
yet its operations succeeded. Based on its improved profitability outlook, mainly as a result of highly
profitable contracts with the government and ability to effectively manage its production capabilities,
9.4% operating margin is expected in 2023, up from 7.8% in 2022. These financial outcomes follow
broader trends in the defence sector as described in Woo et al. (2021), which identifies Lockheed Martin
as a firm taking competitive actions that shape the aerospace industry.
But Lockheed Martin has some broader challenges, such as increased production costs and
labour shortages, as well as the requirement to continuously invent for decades ahead in order to
compete. Also, the future demand for defence technologies can be influenced by geopolitical factors
such as East European and Asian rising tensions. Lockheed Martin’s performance is determined by
competition with a few key firms: Northrop Grumman, Boeing, and Raytheon Technologies who are
also key players in an oligopolistic defence sector. Knowing this competitive landscape is crucial for
Lockheed Martin to know how it needs to transform the way of doing business to stay in the defence
industry leadership (Kohler, 2023).
This report analyses fiscal year 2023 financial performance of Lockheed Martin, using basic
economic principles to determine organization’s company’s position within the broader aerospace and
defence industry. The report looks at the impact of different macroeconomic factors, competitive forces
and internal financial strategies on the growth and profitability of Lockheed Martin by looking at the
factors of supply and demand dynamics, and market structures. The analysis offers an analysis of
strategic insights and recommendations that Lockheed Martin can use to take advantage of its market
leadership and further the financial recovery.
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2. Table of Contents
1. Executive Summary .........................................................................................................................1
2. Table of Contents .............................................................................................................................2
3. List of Figures and Tables................................................................................................................3
4. Introduction ......................................................................................................................................4
5. Detailed Financial Analysis .............................................................................................................5
5.1 Horizontal Analysis/ ......................................................................................................................6
5.2 Index 100 Chart Analysis ..............................................................................................................6
5.3 Vertical Analysis / .........................................................................................................................7
6. Ratio Analysis ..................................................................................................................................9
7. Profitability ......................................................................................................................................9
8. Asset Efficiency .............................................................................................................................10
9. Liquidity .........................................................................................................................................10
10. Capital Structure ............................................................................................................................11
11. Market Performance.......................................................................................................................12
12. Conclusion .....................................................................................................................................13
13. References ......................................................................................................................................14
Appendices ............................................................................................................................................14
1.1 Graphs ..................................................................................................................................15
1.2 Worksheet.............................................................................................................................16
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3. List of Figures and Tables
Figure 1: Products Offered by Lockheed Martin
Figure 2: Revenue vs. COGS (2020-2023)
Figure 3: Index 100 Chart Analysis
Figure 4: Vertical Analysis
Figure 5: Profit Margin vs Net profit (2020-2023)
Figure 6: ROA and ROE (2020-2023)
Figure 7: Liquidity Ratios (2020-2023)
Figure 8: Debt to Equity Ratio (2020-2023)
Table 1: Income Statement – Lockheed Martin Financial Statements 2020-2023
Table 2: Boeing Financial Ratios for Analysis 2020-2023
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4. Introduction
Lockheed Martin Corporation is a company that is one of the world’s largest aerospace, defence,
and security firms with more than a hundred years of history. Lockheed Martin started in 1912 and has
risen to become a military technology leader with solutions for sophisticated fighter jets, missile defence
systems and more, including space exploration technologies and cybersecurity. Lockheed Martin is a
major contractor for U.S. government and other international customers, and at the forefront of national
and defence strategy among nations.
The company is divided into several key segments of business, Aerospace, Missiles and Fire
Control, Rotary and Mission Systems and Space Systems. In addition to the F-35 Lightning II fighter
jet, the THAAD missile defence system are among its most popular products and are two of the most
important assets in modern military defence policy throughout the world. Lockheed Martin’s products
are largely demanded by the government defence contracts mainly by the U.S. Department of Defence.
As a result, the company has been able to command strong financial results given that revenue has been
growing steadily over the past few years. Figure 1 shows a number of Defence Products being provided
by the organization ranging from helicopters up to defence missiles.
Figure 1. Products Offered by Lockheed Martin
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Lockheed Martin has increasingly focused on the defence sector and deployed advanced
technologies like artificial intelligence, autonomous systems, cybersecurity just the same as the
challenges and opportunities for defence sector. Such pressures as higher production costs, supply chain
and disruption and soaring competition from other companies like Boeing and Northrop Grumman
chewing off lucrative deals force the company. The competitive dynamics in the aerospace industry are
very keen, as firms compete very hard (Woo et al. 2021) for market share, in particular in the defence
and space market.
Working through these obstacles will depend on Lockheed Martin’s ability to innovate and
deliver what the customers want and need at the desired cost. Lockheed Martin’s ability to continue to
dominate both traditional and emerging defence technologies in future will be key to its long-term
success (Kohler, 2023).
5. Detailed Financial Analysis
Figure 2: Revenue vs. COGS (2020-2023)
In 2023, Lockheed Martin’s financial performance was highlighted as strong growth despite challenges
in the broader market environment. In this section, the metrics that contribute to the making of the
financial performance of the company, the key metrics, which include revenue, profitability, liquidity,
asset efficiency and capital structure are discussed. It covers the data from 2020 to 2023 to monitor the
trends and evaluate the firm’s progress.
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5.1 Horizontal Analysis1/2
Horizontal analysis is a financial analysis technique used to evaluate a company's performance
over time. From 2020 to 2023, Lockheed Martin has experienced strong revenue growth as a result of
the recovery from COVID-19 pandemic impacts and a rise in global defence spending. In 2023, 2023
the company’s revenue totalled $70 billion (10 percent up compared to the previous year). The growth
was also a result of demand for advanced defence systems like the F-35 fighter jet and missile defence
technology, a major part of Lockheed Martin’s defence contracts.
However, the Aerospace and Missiles and Fire Control segments played an especially important
role in revenue growth. The F-35 program continues to be one of Lockheed Martin’s largest revenue
contributors in the Aerospace division. Due to the increase in political tensions in Eastern Europe and
Asia, with a rising demand for defence technologies globally, the spike in revenue in 2023 is attributed
by a significant extent to emerging need in defence technologies.
Lockheed Martin’s revenue growth also parallels such industry trends. Woo et al. (2021) argue
that the defence technologies still have strong demand related to geopolitical tensions and increasing
military budgets. Lockheed Martin’s strong market position is evidenced by the strong demand for the
company’s key products in the U.S. and global markets.
As can be seen in figure 2 the revenue growth trend from 2020 to 2023 is shaped with a
generally growing line. The government contracts that the company has secured in a competitive market
have provided the company with the financial strength to remain in business and operating while
exploiting the opportunities in the market.
5.2 Index 100 Chart Analysis
Lockheed Martin performs its financials on the years and the Index 100 chart is a suitable
instrument to compare the performance of Lockheed Martin’s financials on a time frame. If we use
2020 as the base year, and Index = 100, by looking at previous few years, we can observe the growth
of some of the key financial figures like revenue, operating income and net profit.
As you can see in figure ___, Lockheed Martin’s revenue has been steadily rising since 2020
and reached 70 billion in 2023 revenue at a rate of 10% from 2022. Like the net profit, net profit has
been consistently rising, as supported by the strong demand for defence systems and the F-35 program
(Gaspar, 2020). The implications of this performance for the successes of management within
production efficiency and sales growth are seen to be similar.
Index Analysis3/4
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Figure 3: Index 100 Chart Analysis
5.3 Vertical Analysis 5/6
With vertical analysis, we are able to evaluate every line item on Lockheed Martin’s financial
statements as a percent of total revenue. The Income Statement Analysis from 2020 – 2023 can be seen
in Figure 2, which splits the relationship between COGS and operating costs and net profit to total
revenue. COGS made up about 64 percent of total revenue in 2023, much as it has in recent years, as
defence production is a capital-intensive industry. While its operating income and return on sales
improved, the company’s operating income and net profit margins remained strong and profits were
bolstered even as production costs rose (Boeing Reports, 2024).
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Figure 4: Vertical Analysis
5.4 Trend Analysis
Financial data from different points in time (periods of time) are compared to determine if there is a
trend, and if so, to predict future projections of the data. As shown in Figure 3, the revenue from 2020
to 2023 will be increasing steadily year on year, especially in the year 2023. Hirsimäki (2023) points
out that the success of the company has been driven by increasing defence contracts and long-term
government projects. At the same time, over the years, the profitability margins of Lockheed Martin
have also gone up, which further played in the positive growth trajectory of the company.
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6. Ratio Analysis
Lockheed Martin’s operating margin went up from 7.8% in 2022 to 9.4% in 2023. This gives rise
to an increase that can be described as better cost management and operational efficiency. There is also
strong revenue growth, but also spent less money on the expenses, and their net profit margin increased
(Gaspar, 2020).
Lockheed Martin’s ROA increased from 5.8% in 2022 up to 6.2% in 2023; this indicates that the
company is leveraging its assets in a profitable manner. It suggests smaller asset sizes that can serve as
a better basis for management of capital-intensive sectors such as aerospace and defence (Hirsimäki,
2023).
Return on Equity (ROE): ROE increased from 10.8% in 2022 to 11.0% in 2023, that Lockheed
Martin is generating high returns to its shareholders which illustrates the effective utilization of the
equity capital (Boeing Reports, 2024).
The ratios for 2020–2023 are presented in Table 1 which show the company’s progress in high
profitability and efficiency.
7. Profitability
Lockheed Martin’s rich profitability was in 2023. They are very successful because the company
has grown the revenue, operated income, and fixed it net profit margin. As highlighted by Gaspar
(2020), the company’s decisive position in defence contracting with the U.S. government has served as
a solid financial foundation allowing consistently high profits.
Figure 5: Profit Margin vs Net profit (2020-2023)
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8. Asset Efficiency
In Capital intensive industries, asset efficiency ratios are to be computed. Over the years, Lockheed
Martin’s asset turnover ratio hasn’t changed much and is approximately 0.8. This ratio represents the
level of asset efficiency or the efficiency of company’s assets in earning revenue. Asset management
efficiency has been improving (Woo et al., 2021), thus, the marginal increase in this ratio from 2022 to
2023. Strong demand for products continues to benefit the company in terms of allowing it to optimize
asset utilization.
Figure 6: ROA and ROE (2020-2023)
The information these ratios provide illustrates whether Lockheed Martin is handling their assets
and stock well, and if so, does well. However, the former (obtained from above) indicates that the firm
is highly capable and efficient of realising its receivables and making cash out of the same. This makes
it good for reasonable credit and collections control and makes sense, for the business, stressing liquidity
and the early realization of revenues.
9. Liquidity
Lockheed Martin’s liquidity ratios, that is, current ratio and quick ratio, indicate the company’s
ability to cover its short-term liabilities. For the year 2024, the current ratio stands at 2.0, which is such
that Lockheed Martin can easily pay its short-term liability (Boeing Reports, 2024). This view is also
supported by the quick ration with a value of 1.4 stating that the company can meet its obligations
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without the help of sales of inventory. These ratios show very strong liquidity, but Kohler (2023)
suggests further improvement of efficiency of performing receivables.
Figure 7: Liquidity Ratios (2020-2023)
10. Capital Structure
Lockheed Martin’s debt-to-equity ratio in the recent years has been increasing, going up to 1.8 in
2023. It implies that the company has depended more on debt financing to fund its operations. Because
the defence industry generally needs a lot of capital to do research and development, as well as to
produce, a large debt-to-equity ratio increases a company’s financial risk in bad economic times or
when interest rates are high (Gaspar, 2020). Lockheed Martin has to wisely manage the debt levels to
avoid endangering its finances.
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Figure 8: Debt to Equity Ratio (2020-2023)
10.1 Market Performance
In 2023, we’ve witnessed Lockheed Martin’s strong resilience in the market, when challenging
internal and external ups and downs have reigned. Currently, the stock price has increased from $200
per share in 2020 to $240 per share by 2023, based on investors’ trust in its position in the market. But
as in the case of many defence companies, Lockheed Martin’s stock performance was not immune to
external factors. Its market performance has been influenced by several key aspect.
Geopolitical tensions and Market Sentiment: Lockheed Martin’s business performance is highly
affected by geopolitical tensions. Given the contextual information, Lockheed Martin would benefit
directly from an increase in the defence budgets, as there has been an increase in defence budgets around
the globe due to the conflicts such as Eastern Europe and security concerns in Asian countries. On one
hand, these factors are the factors that have supported with stock price growth, but on the other hand
these geopolitical conflicts can bring market volatility and defence spending may be affected either by
political changes or peace agreements.
Lockheed Martin’s Financial Results and Profitability: In 2023, Lockheed Martin has achieved
strong financial results, with revenue up by 10 percent and net profit of $4.1 billion. This has allowed
the stock price of the company to keep an upward trajectory. Nevertheless, although these have so far
taken the market forward, profitability expectations for the near future are slightly dented by concerns
over rising production costs and supply chain considerations (Hirsimäki, 2023).
Broad Economic and Regulatory Factors: Lockheed Martin, like other large defence contractors,
is also affected by more general inflation and fluctuating commodity prices including oil. According to
these factors, profitability may get influenced especially when the operational cost is designed by oil
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price volatility. In addition, there is an important element of regulatory scrutiny in defence contracts
and political climate on military expenditure and international relations and these shaping Lockheed
Martin’s market outlook.
The company’s future growth in the market will be dependent on its capacity to stabilize production
and its capability to control supply chain constraints and respond to shifting global defence priorities.
Being positioned in the aircraft and defence industry, the company is well positioned to continue growth
through its strategic placement for growth but should stay agile with economic uncertainties and
geopolitical risks. However, given such challenges, Lockheed Martin’s future looks bright with a good
track record of adapting to changing market conditions and staying financially strong. While investors
are still confident in its future growth potential, its key role in the global defence industry is helping to
drive that.
11. Conclusion
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12. References
Boeing Reports. (2024). Boeing 2023 annual report. Retrieved from
https://www.boeing.com/defense#overview
Gaspar, JFCMM. (2020). Equity research - Lockheed Martin Corporation. Retrieved
from https://repositorio.ulisboa.pt/bitstream/10400.5/20817/1/DM-JFCMMG-
2020.pdf
Hirsimäki, J. (2023). Valuation of Lockheed Martin Corporation using discounted cash
flow and relative valuation methods. Retrieved from
https://digikogu.taltech.ee/et/Download/a2e0f575-f76d-40e3-a568-
6fe12782a61d/LockheedMartinCorporationihindaminediskonteeri.pdf
Kohler, A. (2023). The great divide: Australia’s housing mess and how to fix it
(Quarterly Essay). Retrieved from
https://www.quarterlyessay.com.au/essay/2023/11/the-great-divide/extract
Woo, A., Park, B., Sung, H., Yong, H., Chae, J., & Choi, S. (2021). An analysis of the
competitive actions of Boeing and Airbus in the aerospace industry based on the
competitive dynamics model. Journal of Open Innovation: Technology, Market,
and Complex Systems, 7(3), 192. https://doi.org/10.3390/joitmc7030192
Appendices
1.1 Tables
Category 2020 2021 2022 2023
Revenue (M) 59000 62000 65000 70000
COGS (M) 39000 40000 42000 45000
Operating Income
(M) 4000 4200 4800 5200
Net Profit (M) 3500 3700 3900 4100
Operating Margin
(%) 7.8 8 8.9 9.4
Net Profit Margin
(%) 5.9 5.9 6 5.9
Table 1: Income Statement – Lockheed Martin Financial Statements 2020-2023
Category 2020 2021 2022 2023
Current
Ratio 1.7 1.8 1.9 2
Quick Ratio 1.1 1.2 1.3 1.4
ROA (%) 5.4 5.8 6 6.2
ROE (%) 10.1 10.5 10.8 11
Debt to
Equity 1.5 1.6 1.7 1.8
Table 2: Boeing Financial Ratios for Analysis 2020-2023
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