Report Date: Thursday, July 23, 2026 (before market open) | Current Price: ~$514 (as of 7/22 close)
Lockheed reports second-quarter 2026 results tomorrow morning. Wall Street consensus is looking for EPS of $7.15 (down ~1.9% y/y) on sales of $19.28B (up ~6.2% y/y). The y/y comparison is unusually distorted: in Q2 2025, LMT booked $1.6 billion of pre-tax program losses (a $950M reach-forward loss on a classified Aeronautics program plus $570M/$95M losses on the Canadian and Turkish helicopter programs) and $169 million of other charges, which crushed reported EPS to just $1.46 that quarter versus $6.85 a year earlier. That means reported EPS could look dramatically "better" y/y almost by default unless a similar charge recurs — so the real story tomorrow is less about the EPS headline and more about (1) whether any new program charges surface, (2) segment margin trends, and (3) free cash flow and full-year guidance commentary.
Q1 was soft operationally even without any charges. Sales were roughly flat at $18.0B, and segment operating profit fell 13% y/y to $1.8B, driven by $125M of unfavorable profit adjustments on the F-16 program (rework/schedule extension tied to the new Taiwan/Morocco configuration) and $55M of unfavorable adjustments on C-130 (supplier/integration delays), plus the absence of favorable one-time items that had boosted Q1 2025. Management characterized these as largely one-off/timing issues rather than structural problems, and noted deliveries were "back on track." Free cash flow was negative $291 million in Q1, driven by working-capital timing and an ERP system transition at one business area — management said this would resolve in Q2 and that full-year cash generation remains back-half weighted. Full-year 2026 guidance was reaffirmed: sales of $77.5–$80.0B (~5% growth), segment operating profit of $8.425–$8.675B (~25% growth, since 2025 was depressed by charges), diluted EPS of $29.35–$30.25, and free cash flow of $6.5–$6.8B.
1. Classified-program risk (the biggest swing factor). LMT has two closely watched classified programs — one in Aeronautics, one in Missiles & Fire Control — that have generated large charges in the past (including the $950M Aero charge in Q2 2025 and a prior charge in Q4 2024 on the MFC program). On the Q1 call, CEO Jim Taiclet said no charges were taken in Q1, that oversight has been elevated to senior executives, and that he feels "better about that program than I have probably since I got here." Still, given that Q2 2025's blowup came from exactly this type of program review, any negative commentary or new reach-forward loss would be the single biggest downside catalyst.
2. F-16/C-130/Sikorsky execution. Watch whether the F-16 rework issue and C-130 supplier/integration delays that hit Q1 margins have genuinely stabilized, as management claimed, or whether further cost growth shows up. Sikorsky (RMS) has also been a repeat source of charges (CMHP, TUHP in 2025); any incremental news there matters.
3. Margin cadence. CFO Evan Scott told investors to expect segment margins to improve as the year progresses, with the bulk of the gains in H2 2026 as production milestones are hit. Q2 should show the early stage of that recovery — sales growth reaccelerating (helped by an extra reporting week versus Q1) and margins stepping up from Q1's depressed 10.1% segment level.
4. Free cash flow trajectory. After a negative Q1 (also negative in Q2 2025, at -$150M), confirmation that the ERP-driven working-capital drag has cleared and that cash conversion is on track for the $6.5–$6.8B full-year target will be important, especially with capex running higher ($2.5–$2.8B guided) to support munitions capacity expansion.
5. Munitions ramp-up / long-term framework agreements. Lockheed signed multiyear framework agreements with the Department of War in Q1 to triple/quadruple production of PAC-3, THAAD, and PrSM, backed by cash-flow-protection and clawback provisions. Investors will want updates on definitization progress, capex pacing (~20+ facilities under construction/modernization), and supply-chain bottlenecks (solid rocket motors, seekers). Just this week (July 20), Lockheed also announced a cheaper PAC-3 Adapted Capability Effector (ACE) interceptor priced at less than half the ~$4M cost of the PAC-3 MSE, aimed at replenishing depleted stockpiles faster — a notable strategic pivot toward lower-cost, higher-volume munitions that could be discussed in more detail on the call.
6. F-35 momentum and backlog. F-35 sustainment volume and profit adjustments were a bright spot in Q1, and demand signals remain strong — the FY27 budget request reportedly calls for 85 F-35s versus 47 the prior year, and Lockheed just won a $1.5B Peru F-16 deal (its first F-16 direct commercial sale in decades). Total backlog, however, slipped to $186.4B at the end of Q1 from $193.6B at year-end 2025 (Aeronautics backlog fell from $59.4B to $55.0B), so book-to-bill trends are worth tracking.
LMT shares have had a volatile year — rallying to an all-time high near $676 in early March on defense-spending optimism, then sliding sharply after the April 23 Q1 report (down roughly 5% that day and continuing to fall into the $500s) on margin disappointment. Since then, the stock has traded in a roughly $490–$550 range, and it has notably underperformed peers General Dynamics and RTX over the past several months (both up double-digits YTD) while outperforming Northrop Grumman, which has fallen more sharply. Despite a historically strong demand backdrop for defense primes — driven by elevated global tensions, Patriot/PAC-3 demand from the Ukraine war and Middle East conflict, and rising allied defense budgets — LMT's program-execution charges over the past two years have made investors more cautious on the stock relative to peers with cleaner recent track records.
Going into Thursday's print, the market is braced for continued "growing pains" — soft Q1-style margin pressure potentially bleeding into Q2, set against a still-strong long-term demand story (munitions ramp, F-35, Golden Dome-related missile defense work, international demand). The critical swing factor is whether Lockheed's classified programs and legacy platforms (F-16, C-130, Sikorsky) stay clean of new charges; a repeat of last year's ~$1.6B Q2 hit would be the key downside risk, while a clean quarter with visible sequential margin improvement and cash flow normalization would support management's reaffirmed full-year guidance and the broader defense-upcycle narrative.