Lockheed Martin's Stock Plummets After Big Profit Miss, Northrop Surges to New Highs

Stock Performance of Defense Contractors: A Tale of Two Companies

The stock market saw a significant shift in the performance of two major defense contractors, Lockheed Martin Corp. and Northrop Grumman Corp., following their recent earnings reports. While Lockheed Martin's shares experienced a sharp decline, Northrop Grumman’s stock surged, reflecting contrasting investor sentiment.

Lockheed Martin’s stock dropped by 8.4% after the company reported a one-time loss of $5.83 per share due to $1.6 billion in pretax losses and $169 million in charges during the second quarter. The company attributed these losses to ongoing program reviews that identified new developments affecting the financial position of several legacy programs. CEO Jim Taiclet stated that these findings led to additional charges to address newly identified risks.

Including these charges, Lockheed Martin’s second-quarter profit fell to $342 million or $1.46 per share, significantly below the FactSet consensus estimate of $6.52 per share. The stock initially dropped 9% in morning trading, reaching its lowest level since October 2023. This performance made it one of the worst performers in the S&P 500 index on Tuesday.

Analysts noted that Lockheed Martin faces ongoing challenges, particularly with its aeronautics unit and an IRS dispute over $4.6 billion in prior tax credits. However, the missile division remains a bright spot, with demand consistently outpacing supply.

Northrop Grumman’s Strong Performance

In contrast, Northrop Grumman’s stock rose 9.1% to $563.97, hitting an all-time high. If the gains hold, it will be the first record closing high since October 31, 2022. The company reported a second-quarter profit of $1.2 billion or $8.15 per share, up from $940 million or $6.36 per share in the same period last year. Excluding a $150 million aftertax benefit related to the divestiture of its training-services business, Northrop earned $7.11 per share, surpassing the FactSet consensus estimate of $6.84 per share.

Northrop’s sales increased by 1% to $10.35 billion, exceeding analyst projections of $10.06 billion. The company highlighted strong performance across its business units, with defense systems experiencing a 32% rise in operating income to $253 million. Mission-systems operating income advanced by 22% to $441 million, while space-systems operating income fell 8% to $280 million. Aeronautics-systems operating income grew by 3% to $321 million.

CEO Kathy Warden emphasized the strength of the company’s second-quarter results, including 18% growth in international sales. Northrop also raised its full-year adjusted earnings forecast to a range of $25 to $25.40 per share, up from its previous target of $24.95 to $25.35 per share. Analyst Robert Stallard noted positive adjustments for Northrop’s Sentinel missile program and progress on the B-21 bomber program, which could lead to higher revenues and profits in the long term.

Challenges for Lockheed Martin

Lockheed Martin’s classified programs faced significant challenges, with design, integration, and test issues impacting schedules and costs more than previously estimated. This comes just two quarters after the company booked $1.7 billion in losses linked to its classified programs, which contributed to a major profit miss in the fourth quarter.

Despite receiving additional F-35 jet purchases from allied countries and securing over $1 billion in missile contracts from the U.S. Army, Lockheed Martin’s revenue rose slightly to $18.16 billion, falling short of analyst projections of $18.57 billion. The company also cut its 2025 earnings estimate to a range of $21.70 to $22 per share, down from its earlier projection of $27 to $27.30 per share. This revised outlook is below the FactSet consensus estimate of $27.36 per share for 2025.

As of Monday’s close, Lockheed Martin’s stock had declined by 5.2% in 2025, while the S&P 500 had risen by 7.2%. The contrasting performances of these two defense contractors highlight the volatility and complexity of the sector, with each company facing unique challenges and opportunities.