Lockheed Martin Corp. (NYSE:LMT) reported $1.8 billion in charges in the second quarter, led by a classified Aeronautics program and two Rotary and Mission Systems projects, prompting Bank of America Securities (BofA) analyst Ronald J. Epstein to trim his outlook.
The analyst reaffirmed a Neutral rating and lowered his price forecast to $480 from $495, citing ongoing program challenges and limited near-term catalysts.
Epstein said the recurring charges, which follow roughly $2 billion recorded in 2024, have shaken investor confidence. The latest write-downs included $950 million tied to a classified Aero effort, $570 million on Canada's Maritime Helicopter Program, and $95 million related to Turkey's utility helicopter program.
Also Read: Lockheed Martin Under Intense Wall Street Pressure On Mounting Program Risks, Q2 Woes
Together, the charges cut $5.83 per share from quarterly earnings. Additional hits came from a $66 million NGAD asset write-off and a $103 million tax adjustment, partly offset by state tax benefits.
The bright spot remains the Missiles and Fire Control (MFC) unit, which Epstein identified as the primary driver of potential upside. Programs such as Long Range Anti-Ship Missile (LRASM), Joint Air-to-Surface Standoff Missile (JASSM), Patriot Advanced Capability-3 (PAC-3), and Guided Multiple Launch Rocket System (GMLRS) remain in high demand as the U.S. and allies replenish stockpiles. MFC's backlog rose 4% from 2024 and 25% over two years, signaling a strong pipeline.
However, he added, supply chain constraints limit how fast the segment can scale, meaning it cannot fully counterbalance headwinds elsewhere.
Looking ahead, BofA lowered its adjusted EPS forecast for 2025 to $21.95 from $27.30. Projections for 2026 and 2027 were also reduced slightly.
Epstein set his price forecast at $480, down from $495, based on a 12x EV/EBITDA multiple on 2026e, a level he sees as capped at Lockheed Martin's 10-year historical average while the company works through margin pressure and tax headwinds.
Epstein flagged additional risks, including a potential $4.6 billion IRS tax dispute, program execution challenges, and budget-related uncertainty around the F-35. While long-term demand for missiles remains supportive, Epstein said Lockheed Martin may remain in the penalty box until management resolves program issues and restores investor confidence.
U.S. Army Awards $720 Million Contract for JAGM, HELLFIRE Production
Additionally, Lockheed Martin on Thursday announced it has secured a $720 million contract from the U.S. Army to produce Joint Air-to-Ground Missiles (JAGM) and HELLFIRE missiles, marking the fourth and final follow-on award under its current multi-year agreement.
The deal will support U.S. Army, Navy, and international customers, including a Foreign Military Sales order of 160 JAGMs for the United Kingdom and HELLFIRE deliveries to NATO allies Poland, Spain, Czech Republic, Italy, and new customer Canada.
Price Action: LMT shares are trading lower by 0.12% to $445.62 at last check Thursday.
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