Lockheed Martin Financial Model
Aerospace and Defence Company Financials Example (Free Excel Download)
Lockheed Martin is a global security and aerospace company principally engaged in the research, design, development, manufacture, integration, and sustainment of advanced technology systems.
professionals from Deloitte
Used by professionals from
About this model
This model projects Lockheed Martin's future cash flows and earnings to determine its intrinsic equity value, enabling an equity research analyst to issue a buy, hold, or sell recommendation based on the company's $194 billion backlog and long-term defence contract visibility.
Lockheed Martin is a global security and aerospace company principally engaged in the research, design, development, manufacture, integration, and sustainment of advanced technology systems. The company serves as the largest defence contractor for the United States Government, which accounts for approximately 73% of its total consolidated net sales, with the remainder coming from international customers and commercial sales.
Business segments (based on FY2025 revenue of $75.0 billion):
- Aeronautics (40.3%): Tactical aircraft, airlift, and sustainment, dominated by the F-35 Lightning II programme.
- Rotary and Mission Systems (23.1%): Sikorsky helicopters, Aegis Combat System, and naval sensors.
- Missiles and Fire Control (19.3%): PAC-3, THAAD, HIMARS, and precision strike weapons.
- Space (17.3%): Satellites, strategic missiles (Trident II), and space exploration systems (Orion).
Key geographies: United States (approx. 73%), International (approx. 27%). Business model type: Long-term contract manufacturing and sustainment (percentage-of-completion accounting). Competitive position: The undisputed market leader in global defence, holding a near-monopoly on 5th-generation Western fighter jets (F-35) and top-tier positions in missile defence. Key competitors include RTX Corporation, General Dynamics, Northrop Grumman, and Boeing. Recent major events: In FY2025, the company recorded a record backlog of $194 billion, absorbed a $479 million pension settlement charge, and experienced significant reach-forward losses on classified programmes that impacted operating margins.
The downloadable Lockheed Martin financial model includes SEC-sourced historical financials, forecast assumptions, core operating schedules, and valuation outputs in an Excel workbook built for review and scenario analysis.
A turnkey financial model
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
No hidden macros or external links
There are no unexplained external workbook links or macros to undermine auditability or portability.
Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
Historicals & AssumptionsLockheed Martin financial modelCompany, Historicals & Assumptions used
Source: SEC EDGAR · values in USD
| Line item | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|
| Revenue | $67.04B | $65.98B | $67.57B | $71.04B | $75.05B |
| Gross profit | $9.06B | $8.29B | $8.48B | $6.93B | $7.62B |
| Operating income | $9.12B | $8.35B | $8.51B | $7.01B | $7.73B |
| Net income | $6.32B | $5.73B | $6.92B | $5.34B | $5.02B |
Forecast assumptions
Defaults used in the downloadable model. Forecast horizon: FY2026–FY2030.
See 8 moreSee less
How to build a detailed financial model for Lockheed Martin
A complete walkthrough of every driver, margin, working-capital input, and capital-allocation assumption used in the downloadable model.
Revenue Deep Dive
Aeronautics
- Segment name: Aeronautics
- Revenue driver formula: Beginning Backlog + New Orders (Bookings) - Ending Backlog
- Historical growth rate: 3% to 6% CAGR (FY2025 growth was 5.7%).
- Key growth levers and headwinds: F-35 production volume, Block 4 upgrade adoption, and international F-35 orders. Headwinds include US Department of Defense budget caps and supply chain constraints.
- Pricing dynamics: Cost-plus and fixed-price incentive contracts negotiated directly with the US Government.
- Revenue recognition notes: Recognised over time using the cost-to-cost method.
- Seasonality: Q4 is typically the strongest quarter for revenue recognition and cash collections due to government year-end budget cycles.
Missiles and Fire Control (MFC)
- Segment name: Missiles and Fire Control
- Revenue driver formula: Munitions Volume x Unit Price + Sustainment Contracts
- Historical growth rate: 5% to 14% (FY2025 growth was 13.9%, driven by geopolitical conflicts).
- Key growth levers and headwinds: Replenishment of US and allied stockpiles (GMLRS, PAC-3, Javelin).
- Pricing dynamics: Primarily fixed-price contracts.
- Revenue recognition notes: Over time as costs are incurred.
- Seasonality: Generally linear, with slight Q4 weighting.
Rotary and Mission Systems (RMS)
- Segment name: Rotary and Mission Systems
- Revenue driver formula: Helicopter Deliveries x Average Selling Price + Mission Systems Contract Value
- Historical growth rate: Flat to 2% (FY2025 growth was 0.3%).
- Key growth levers and headwinds: Black Hawk replacement cycles and Aegis system upgrades. Headwinds include the cancellation of the Future Attack Reconnaissance Aircraft (FARA) programme.
- Pricing dynamics: Mix of fixed-price and cost-reimbursable.
- Revenue recognition notes: Over time using the cost-to-cost method.
- Seasonality: Q4 heavy for helicopter deliveries.
Space
- Segment name: Space
- Revenue driver formula: Satellite/Missile Deliveries + Classified Programme Milestones
- Historical growth rate: 2% to 5% (FY2025 growth was 4.4%).
- Key growth levers and headwinds: Next Generation Interceptor (NGI) development and classified space programmes. Headwinds include United Launch Alliance (ULA) joint venture volatility.
- Pricing dynamics: Heavily weighted towards cost-plus contracts for development.
- Revenue recognition notes: Over time using the cost-to-cost method.
- Seasonality: Milestone-driven, less predictable seasonality.
Cost Structure
Variable Costs / COGS
- Line-by-line breakdown: Product costs (direct materials, subcontractor costs, direct labour, manufacturing overhead) and Service costs (engineering labour, sustainment materials).
- Gross margin range: 12% to 14% historically.
- Key input costs and commodity exposures: Titanium, aluminium, electronic components, and highly skilled aerospace engineering labour.
- How COGS scales with revenue: Highly linear due to the cost-to-cost revenue recognition method.
Operating Expenses
- R&D: Company-funded R&D is typically 2.0% to 2.5% of sales. Customer-funded R&D is included in COGS.
- SG&A: Very lean, typically running at 4.0% to 5.0% of sales, as marketing to a single primary customer requires less overhead than commercial enterprises.
- Depreciation & Amortisation: Approximately 2.0% of sales.
- Stock-Based Compensation: Less than 0.5% of sales.
- Restructuring / one-time charges: Infrequent, but the company regularly records "profit booking rate adjustments" and reach-forward losses on classified contracts (e.g., $1.7 billion in late 2024 / early 2025).
Margin Profile
- Gross margin: 12.5% to 13.5%.
- EBITDA margin: 12.0% to 13.5%.
- Operating margin: 10.0% to 11.5% (consolidated).
- Margin trend: Compressing slightly in recent years due to fixed-price development contract losses and supply chain inflation, though expected to stabilise as legacy contracts roll off.
- Segment-level margins: Aeronautics (10%), MFC (12% to 13%), RMS (9% to 10%), Space (9% to 10%).
Balance Sheet Structure
- Total assets: Approximately $60 billion.
- Key asset categories: Contract assets (unbilled receivables), inventories, and property, plant, and equipment.
- Goodwill & intangibles as % of total assets: Approximately 22% (driven by historical acquisitions like Sikorsky).
- Working capital profile:
- Days Sales Outstanding (DSO): 15 to 25 days.
- Days Inventory Outstanding (DIO): 25 to 35 days.
- Days Payable Outstanding (DPO): 20 to 30 days.
- Net working capital as % of revenue: Often negative or near zero.
- Is working capital positive or negative? The company frequently operates with negative net working capital due to substantial contract liabilities (advance payments from the US Government), which serves as a source of funding.
- PP&E: Manufacturing facilities, tooling, and test equipment. Useful lives range from 10 to 40 years for buildings and 2 to 15 years for equipment.
- Right-of-use assets / operating leases: Approximately $1.5 billion, relatively immaterial for the scale of the business.
Capital Expenditure & Investment
- Capex as % of revenue: 2.0% to 2.5% (FY2025 capex was approximately $1.6 billion).
- Maintenance capex vs. growth capex: Roughly 40% maintenance, 60% growth (investments in digital transformation, classified facilities, and advanced manufacturing).
- Major capex programmes underway: 1LMX digital transformation initiative and expansion of classified manufacturing facilities.
- Capitalised software / development costs: Minimal compared to commercial tech; most development is customer-funded.
- M&A pattern: Bolt-on acquirer (e.g., Aerojet Rocketdyne attempt was blocked, so focus remains on smaller tech tuck-ins).
- Typical acquisition multiple paid: 12x to 15x EV/EBITDA for defence technology assets.
Debt & Capital Structure
- Total debt: Approximately $19 billion.
- Debt/EBITDA ratio: 1.8x to 2.2x.
- Credit rating: A- (S&P), A3 (Moody's).
- Key debt instruments: Senior unsecured notes with staggered maturities.
- Maturity profile: Well-laddered, with average maturity exceeding 10 years.
- Interest rate profile: Over 90% fixed rate, with a weighted average interest rate of approximately 4.0%.
- Covenants: Standard investment-grade covenants; no restrictive financial maintenance covenants.
- Share repurchase programme: Highly active. The company regularly repurchases 2% to 4% of its outstanding shares annually.
- Dividend policy: Strong dividend payer with a yield of approximately 2.5% to 3.0% and a payout ratio of 45% to 55%. The Q1 2026 dividend was set at $3.45 per share.
Cash Flow Characteristics
- Operating cash flow conversion: OCF / Net Income is typically 1.2x to 1.5x (FY2025 OCF was $8.6 billion on $5.0 billion net income).
- Free cash flow margin: 8% to 10% (FY2025 FCF was $6.9 billion on $75.0 billion sales).
- Major non-cash items: Depreciation, amortisation, and non-cash pension adjustments (FAS/CAS difference).
- Working capital cash flow impact: Highly volatile quarter-to-quarter based on the timing of government progress payments and supplier liquidations.
- Capex intensity: Low (asset-light manufacturing model where the government often owns the specialised tooling).
- Cash tax rate vs. GAAP effective tax rate: Cash taxes are often lower than GAAP taxes due to R&D tax credit timing and accelerated depreciation, though Section 174 R&D capitalisation rules have recently increased cash tax burdens.
Sheet Structure
- Assumptions: Hardcoded inputs for macroeconomic drivers, segment growth, margins, tax rates, and capital allocation.
- Scenarios: Base, Bull, and Bear cases toggling defence budget growth and F-35 delivery volumes.
- Backlog Schedule: Roll-forward of Beginning Backlog, Bookings (Orders), and Revenue Recognised for all four segments.
- Income Statement: Revenue by segment, COGS, SG&A, FAS/CAS operating adjustment, interest, and taxes.
- Balance Sheet: Standard assets and liabilities, specifically breaking out Contract Assets and Contract Liabilities.
- Cash Flow Statement: OCF, CFI, CFF, and Free Cash Flow calculation.
- Working Capital Schedule: DSO, DPO, and contract asset/liability turnover.
- Depreciation & Capex: PP&E roll-forward and 1LMX investment tracking.
- Debt Schedule: Interest expense calculation and debt maturity ladder.
- Pension Schedule: Tracking of the FAS (Financial Accounting Standards) vs. CAS (Cost Accounting Standards) pension income/expense bridge.
- DCF Valuation: WACC calculation, terminal value, and implied share price.
Key Financial Relationships
- Aeronautics Revenue = Aeronautics Beginning Backlog x Aeronautics Book-to-Bill Ratio x Revenue Conversion Rate
- MFC Revenue = MFC Beginning Backlog x MFC Book-to-Bill Ratio x Revenue Conversion Rate
- RMS Revenue = RMS Beginning Backlog x RMS Book-to-Bill Ratio x Revenue Conversion Rate
- Space Revenue = Space Beginning Backlog x Space Book-to-Bill Ratio x Revenue Conversion Rate
- Total Net Sales = Aeronautics Revenue + MFC Revenue + RMS Revenue + Space Revenue
- Segment Operating Profit = (Aeronautics Revenue x Aero Margin) + (MFC Revenue x MFC Margin) + (RMS Revenue x RMS Margin) + (Space Revenue x Space Margin)
- Consolidated Operating Profit = Total Segment Operating Profit + FAS/CAS Operating Adjustment - Unallocated Corporate Costs
- Ending Backlog = Beginning Backlog + Total Bookings - Total Net Sales
- Contract Assets = Total Net Sales x (Contract Asset Days / 365)
- Contract Liabilities = Total Bookings x (Contract Liability Days / 365)
- Free Cash Flow = Cash from Operations - Capital Expenditures
- Shares Outstanding = Prior Period Shares - (Share Repurchase Amount / Average Share Price)
Cross-Sheet Dependencies
The Assumptions sheet feeds the Backlog Schedule, which determines the revenue for the Income Statement. The revenue and bookings figures feed the Working Capital Schedule to calculate Contract Assets and Contract Liabilities. These working capital changes flow into the Cash Flow Statement to determine Operating Cash Flow. The OCF dictates the cash available for share repurchases and dividends in the Assumptions and Debt Schedule, which in turn loops back to the Income Statement via interest expense and EPS calculations. The FAS/CAS adjustment from the Pension Schedule is a critical non-cash bridge between the Income Statement and Cash Flow Statement.
Sign Convention
- Revenue, margins, and asset balances are entered as positive numbers.
- Expenses (COGS, SG&A, Interest Expense) are entered as negative numbers in the Income Statement aggregation.
- Capital expenditures and dividends paid are entered as negative numbers in the Cash Flow Statement.
- A decrease in working capital assets is positive for cash flow; an increase is negative.
- An increase in working capital liabilities is positive for cash flow; a decrease is negative.
Things Most Likely to Go Wrong
- FAS/CAS pension accounting is highly complex. The model must separate the CAS cost (which is recoverable from the government and sits in segment margins) from the FAS cost (which is the GAAP expense). The net difference sits below segment profit but above consolidated operating profit.
- Reach-forward losses on fixed-price development contracts (like the $1.7 billion classified loss in 2024/2025) can severely distort historical margin averages. The model should normalise margins excluding these one-time charges.
- Contract assets and liabilities swing wildly based on the timing of US Government progress payments. Using a simple percentage of revenue for working capital will fail to capture this volatility.
- The company frequently uses debt to fund share repurchases. If the model does not dynamically link FCF generation to the buyback programme, the share count will be inaccurate.
- R&D tax legislation (Section 174) requires capitalising R&D for tax purposes, creating a massive divergence between GAAP tax expense and cash taxes paid.
- F-35 delivery delays (such as the TR-3 software issues) shift revenue recognition to the right, meaning backlog grows but near-term revenue stalls.
- The company's backlog includes both funded and unfunded orders. The model must assume a conversion rate that reflects congressional appropriation risks.
- Unallocated corporate costs are reported separately from segment operating profit and must be deducted to reach consolidated EBIT.
Validation Checks
- Consolidated Operating Margin should remain between 10.0% and 11.5%; flag if it drops below 9.5% or exceeds 12.0%.
- Capex as a percentage of revenue must stay between 2.0% and 2.5%.
- Free Cash Flow conversion (FCF / Net Income) should be >1.1x due to depreciation and pension dynamics.
- Total Backlog should equal approximately 2.5x forward twelve months' revenue.
- Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period.
- Effective tax rate should remain between 15.0% and 17.0% due to foreign-derived intangible income (FDII) and R&D tax benefits.
- Debt/EBITDA should not exceed 2.5x to maintain the current credit rating.
- Dividend payout ratio should remain between 45% and 55% of Net Income.
Key Assumptions (Default Values)
| Assumption | Default Value | Unit | Rationale |
|---|---|---|---|
| Aeronautics Revenue Growth | 5.7 | % | Based on FY2025 actual growth driven by F-35 sustainment. |
| MFC Revenue Growth | 13.9 | % | Based on FY2025 actuals; elevated due to munitions demand. |
| RMS Revenue Growth | 0.3 | % | Based on FY2025 actuals; flat growth in legacy helicopter platforms. |
| Space Revenue Growth | 4.4 | % | Based on FY2025 actuals; steady growth in classified space. |
| Aeronautics Operating Margin | 10.0 | % | Historical average excluding severe reach-forward losses. |
| MFC Operating Margin | 12.5 | % | Historically the highest margin segment due to fixed-price production. |
| RMS Operating Margin | 10.0 | % | Stable margin profile on mature platforms. |
| Space Operating Margin | 9.5 | % | Lower margin due to higher mix of cost-plus development work. |
| Unallocated Corporate Costs | 1.0 | % of Sales | Standard run-rate for corporate overhead not billed to segments. |
| Effective Tax Rate | 16.0 | % | Blended rate reflecting US statutory rate minus R&D/FDII benefits. |
| Capex as % of Sales | 2.1 | % | Aligns with management's long-term guidance and 1LMX spending. |
| Dividend per Share (Annual) | 13.80 | $ | Annualised based on Q1 2026 declared dividend of $3.45 per quarter. |
| Share Repurchases | 4.0 | $ Billions | Typical annual run-rate for capital return programme. |
| WACC | 8.0 | % | Standard discount rate for prime defence contractors. |
| Terminal Growth Rate | 2.0 | % | Aligns with long-term US GDP and defence budget growth. |
Data Sources & Benchmarks
- SEC EDGAR: Lockheed Martin (LMT) 10-K, 10-Q, and 8-K filings.
- Investor Relations: www.lockheedmartin.com/investor for earnings presentations and quarterly financial charts.
- Key peers for benchmarking: RTX Corporation (RTX), General Dynamics (GD), Northrop Grumman (NOC), L3Harris Technologies (LHX).
- Industry data sources: US Department of Defense (DoD) budget request documents (PB26), Stockholm International Peace Research Institute (SIPRI) for global defence spending trends.
- Consensus estimates: Bloomberg or FactSet for forward-looking EPS and revenue consensus.
Sources
- Lockheed Martin Corporation Form 10-K for the fiscal year ended December 31, 2024.
- Lockheed Martin Fourth Quarter and Full Year 2025 Financial Results Press Release (January 29, 2026).
- Lockheed Martin 2025 Proxy Statement.
- Macrotrends Lockheed Martin Revenue History.
- Bullfincher Lockheed Martin Segment Revenue Breakdown.
Do more with the Lockheed Martin model
Frequently asked
What does Lockheed Martin do?+
Lockheed Martin is a global security and aerospace company that researches, designs, develops, manufactures, integrates, and sustains advanced technology systems. It serves as the largest defense contractor for the United States Government, which accounts for approximately 73% of its total consolidated net sales.
What are Lockheed Martin's main sources of revenue?+
Lockheed Martin's revenue is primarily driven by its Aeronautics segment, dominated by the F-35 Lightning II program, which accounted for 40.3% of FY2025 revenue. Other significant segments include Rotary and Mission Systems, Missiles and Fire Control, and Space, all serving long-term defense contracts.
What is the assumed revenue growth rate for Lockheed Martin in the financial model?+
The financial model projects Lockheed Martin's revenue to grow at an annual rate of approximately 3.1%. This growth is supported by the company's $194 billion backlog and long-term defense contract visibility.
What is the purpose of the Lockheed Martin financial model?+
The financial model projects Lockheed Martin's future cash flows and earnings to determine its intrinsic equity value. This analysis enables an equity research analyst to issue a buy, hold, or sell recommendation based on the company's robust backlog and long-term defense contract visibility.
Can I download an Excel financial model for Lockheed Martin?+
Yes, an Excel financial model for Lockheed Martin is available for download. This general corporate model forecasts the company's financials for the FY2026–FY2030 horizon.
How does Lockheed Martin manage its working capital?+
Lockheed Martin frequently operates with negative net working capital due to substantial contract liabilities, which include advance payments from the US Government. This structure effectively serves as a source of funding for the company's operations.
Have more financial modelling questions? Contact us
Created by ex-finance professionals
Hey, I’m Alex and I created Finamodel.
Over my years in the finance industry I kept building the same models over and over again. Same structure, same assumptions, different logo. So I started building frameworks to turn them into clean, reusable templates.
Every model here is one I’d actually use for a client, and I personally vet each one before it goes up.
I’m not an expert in every industry, but I’ve built enough models to know what belongs in one. And when something is completely foreign to me, I reach out to my network for experts to work on our models with us.
Having a template library on hand cuts a first build from hours to minutes.
Need help finding your model? You’ll find me in the Finamodel app!
Other Aerospace and Defence Company Financial Models
Browse another company in the same sector.
Boeing
The Boeing Company is a leading global aerospace firm that designs, manufactures, and services commercial airplanes, defence products, and space systems.
General Dynamics
General Dynamics is a global aerospace and defence company that provides business aviation, ship construction and repair, land combat vehicles, weapons systems, and technology products.
GE Aerospace
GE Aerospace is a global leader in the design, production, and maintenance of commercial and military aircraft engines and integrated systems.
Huntington Ingalls Industries
Huntington Ingalls Industries (HII) is the largest military shipbuilding company in the United States and a provider of professional services to government and industry partners.
Howmet Aerospace
Howmet Aerospace manufactures engineered metal products for the aerospace and commercial transportation industries.
Leidos
Leidos is a Fortune 500 science, engineering, and information technology company that provides services and solutions to the defense, intelligence, civil, and health markets.
L3Harris
L3Harris Technologies is an aerospace and defence technology innovator that provides mission-critical solutions across space, air, land, sea, and cyber domains.
Northrop Grumman
Northrop Grumman is a top-tier global aerospace and defence technology company that provides advanced systems, products, and solutions to the US Department of Defense (DoD) and allied nations.
Explore more Manufacturing financial model templates.
