LMT

Lockheed is a durable, structurally advantaged franchise. FY2025 revenue hit a record $75.0B (+5.6%, the fastest growth in five years), and the 10-K shows backlog at $193.6B versus $176.0B a year earlier — roughly 2.6x annual sales, with $120.2B funded and ~37% expected to convert to revenue within 12 months. That gives unusually visible top-line runway, underpinned by 72% U.S. Government demand (63% DoD) and broad international pull on F-35, PAC-3/THAAD, Aegis and rotary programs amid elevated spending in Europe, the Middle East and the Pacific. Cash generation is excellent: operating cash flow rose 22.7% to $8.56B — about 1.7x net income — comfortably funding $3.13B of dividends and $3.0B of buybacks (shares -2.3%).

The problem is profitability, not the business. Despite record revenue, net income fell 6.0% to $5.02B, the second straight decline from $6.92B in FY2023, and net margin compressed to 6.7% from 10.2% two years ago — the signature of charges on fixed-price development programs. Gross and operating margins sit near 10%. Diluted EPS of $21.49 (-3.7%) held up only because buybacks shrank the count. The 74.6% ROE looks spectacular but is an artifact of a razor-thin $6.72B equity base against $53.1B of liabilities (7.9x); with ~$21.7B of debt versus $4.12B cash, there is little balance-sheet cushion.