Lockheed Martin Corp. (NYSE:LMT)

The income tax expense exhibits fluctuating patterns over the five-year period. Current tax expense generally decreased from 2021 to 2025, while deferred tax expense demonstrated a more volatile trend, shifting from a benefit to an expense and then back to a benefit.

Current Tax Expense

Current tax expense began at US$1,418 million in 2021, increased to US$1,705 million in 2022, and then decreased to US$1,676 million in 2023. A further decline was observed in 2024, reaching US$1,472 million, followed by a substantial decrease to US$533 million in 2025. This represents a significant reduction in current tax obligations over the latter part of the period.

Deferred Tax Expense

Deferred tax expense started as a benefit of US$183 million in 2021. This benefit diminished considerably in 2022, becoming an expense of US$757 million. The expense lessened in 2023 to US$498 million, and further decreased to US$588 million in 2024. However, in 2025, deferred taxes reversed to a benefit of US$372 million. This suggests changes in temporary differences between book and tax accounting.

Federal and Foreign Income Tax Expense

Federal and foreign income tax expense decreased from US$1,235 million in 2021 to US$948 million in 2022. An increase to US$1,178 million was noted in 2023, followed by a decrease to US$884 million in 2024. The expense slightly increased in 2025, reaching US$905 million. This figure represents the combined effect of both current and deferred tax components.

Relationship between Current and Deferred Taxes

The combined effect of current and deferred taxes largely dictates the overall federal and foreign income tax expense. The significant shift in deferred taxes from a benefit to an expense, and then back to a benefit, heavily influences the fluctuations observed in the total tax expense. The substantial decrease in current tax expense in 2025, coupled with the deferred tax benefit, resulted in a relatively low overall tax expense for that year.

The volatility in deferred tax expense warrants further investigation to understand the underlying causes, such as changes in tax laws, valuation allowances, or the recognition of temporary differences. The decreasing trend in current tax expense may indicate changes in taxable income or effective tax rates.

The effective income tax rate exhibited fluctuations over the five-year period, consistently remaining below the U.S. federal statutory tax rate of 21.00%. An initial decline was followed by relative stability and a subsequent increase towards the end of the observed timeframe.

Effective Tax Rate Trend

The effective tax rate decreased from 16.40% in 2021 to 14.20% in 2022. A slight increase to 14.50% occurred in 2023, followed by a return to 14.20% in 2024. The final year observed, 2025, showed a further increase to 15.30%.

The consistent difference between the effective tax rate and the statutory rate suggests the presence of factors reducing the company’s tax burden. These factors could include tax credits, deductions, or differing tax rates in international jurisdictions where the company operates. The increase in the effective tax rate in 2025 indicates a potential lessening of these mitigating factors or a shift in the company’s earnings mix.

Comparison to Statutory Rate

Throughout the period, the effective tax rate remained notably lower than the 21.00% U.S. federal statutory rate. The largest difference was observed in 2022 and 2024, where the effective rate was 6.80 percentage points below the statutory rate. The smallest difference was in 2021, at 4.60 percentage points.

The observed trend warrants further investigation into the specific components impacting the effective tax rate each year. Understanding these components is crucial for forecasting future tax liabilities and assessing the sustainability of the current tax position.

The composition of deferred tax assets and liabilities exhibits notable shifts over the five-year period. A general trend of increasing deferred tax assets is observed, though with fluctuations, while deferred tax liabilities consistently increase. The net position remains a net deferred tax asset throughout the period, but the magnitude of this asset varies.

Deferred Tax Assets - Gross

Gross deferred tax assets initially increased from US$3,925 million in 2021 to US$5,327 million in 2022, representing a significant rise. A subsequent decrease to US$4,481 million occurred in 2023, followed by increases in 2024 and 2025 to US$5,128 million and US$4,792 million, respectively. The largest components contributing to these assets are pensions, accrued compensation and benefits, contract accounting methods, and research and development expenditures. The most substantial increase within the gross deferred tax assets is seen in contract accounting methods, growing from US$470 million in 2021 to US$1,217 million in 2025. Research and development expenditures also show a considerable increase, beginning in 2022.

Valuation Allowance

The valuation allowance against deferred tax assets consistently increased throughout the period, moving from negative US$15 million in 2021 to negative US$60 million in 2025. This suggests a growing assessment of the realizability of a portion of the deferred tax assets. The increasing valuation allowance partially offsets the growth in gross deferred tax assets, resulting in a more moderate increase in net deferred tax assets.

Deferred Tax Liabilities

Deferred tax liabilities demonstrate a consistent upward trend, increasing from negative US$1,628 million in 2021 to negative US$1,775 million in 2025. The primary drivers of these liabilities are goodwill and intangible assets, property, plant, and equipment, and other deferred tax liabilities. Goodwill and intangible assets represent the largest component, consistently contributing the most significant portion of the total deferred tax liabilities. Property, plant, and equipment also contribute substantially, though its impact decreases slightly over the period.

Net Deferred Tax Assets (Liabilities)

The net deferred tax asset position decreased from US$2,282 million in 2021 to US$2,957 million in 2025, with a peak of US$3,739 million in 2022. While remaining positive throughout the period, the fluctuations indicate changes in the balance between the growth of deferred tax assets and liabilities, as well as the impact of the valuation allowance. The decrease in 2024 and 2025 suggests that the growth in deferred tax liabilities and the valuation allowance are outpacing the growth in gross deferred tax assets.

The increasing valuation allowance and deferred tax liabilities warrant continued monitoring, as they could potentially impact future tax benefits. The significant growth in contract accounting methods and research and development expenditures as contributors to deferred tax assets suggests potential changes in business activities or accounting practices.

The deferred tax asset balance exhibited volatility over the five-year period. Beginning at US$2,290 million in 2021, it increased substantially to US$3,744 million in 2022. A subsequent decrease was noted in 2023, falling to US$2,953 million, followed by a rise to US$3,557 million in 2024. The most recent year, 2025, shows a further decline to US$2,975 million. Deferred tax liabilities remained relatively small in comparison, consistently below US$30 million throughout the period.

Deferred Tax Assets - Trend Analysis

The significant increase in deferred tax assets in 2022 warrants further investigation. This could be attributable to changes in temporary differences, utilization of tax loss carryforwards, or alterations in tax laws. The subsequent fluctuations suggest ongoing changes in these underlying factors. The decrease observed in both 2023 and 2025 may indicate a reduction in these temporary differences or a greater utilization of the assets.

Deferred Tax Liabilities - Trend Analysis

Deferred tax liabilities experienced a modest increase from 2021 to 2024, rising from US$8 million to US$24 million. This suggests a gradual accumulation of taxable temporary differences. The decrease to US$18 million in 2025 could be due to the reversal of some of these temporary differences or changes in applicable tax rates. The overall level of deferred tax liabilities remains low relative to the deferred tax assets.

Relationship between Assets and Liabilities

The deferred tax asset balance consistently and substantially exceeded the deferred tax liability balance throughout the observed period. This indicates a net deferred tax asset position. The relatively small size of the deferred tax liabilities suggests that the company’s future tax obligations related to these liabilities are not a significant concern.

Continued monitoring of these deferred tax balances is recommended to assess the impact of future taxable income and changes in tax legislation. Understanding the composition of the deferred tax assets, specifically the nature of the temporary differences and the availability of tax loss carryforwards, is crucial for a comprehensive assessment.

The financial information reveals a consistent pattern of adjustments related to deferred tax assets and liabilities over the five-year period. These adjustments result in lower reported values for total assets, stockholders’ equity, and net earnings when deferred taxes are removed from consideration.

Total Assets

Reported total assets increased from $50.873 billion in 2021 to $59.840 billion in 2025. However, adjusted total assets, reflecting the removal of deferred tax impacts, show a smaller increase, moving from $48.583 billion to $56.865 billion over the same period. The difference between reported and adjusted assets widens over time, indicating a growing deferred tax position.

Total Liabilities

Reported total liabilities increased steadily from $39.914 billion in 2021 to $53.119 billion in 2025. The adjustments to total liabilities are minimal, with adjusted values closely mirroring reported values throughout the period. This suggests that deferred tax liabilities are not a significant component of the overall liability structure.

Stockholders’ Equity

Reported stockholders’ equity experienced a substantial decline from $10.959 billion in 2021 to $6.721 billion in 2025. The adjustment for deferred taxes significantly exacerbates this decline, reducing adjusted stockholders’ equity from $8.677 billion to $3.764 billion over the same timeframe. This indicates that a considerable portion of reported equity is attributable to deferred tax assets, and their removal has a pronounced effect.

Net Earnings

Reported net earnings fluctuate over the period, starting at $6.315 billion in 2021, decreasing to $5.732 billion in 2022, increasing to $6.920 billion in 2023, then decreasing to $5.336 billion in 2024, and finally to $5.017 billion in 2025. Adjusting for deferred taxes results in lower net earnings figures for each year, with the largest adjustment observed in 2022, reducing reported net earnings from $5.732 billion to $4.975 billion. The adjusted net earnings trend mirrors the reported trend, but at a consistently lower level. In 2025, adjusted net earnings are reported at $5.389 billion, higher than the reported $5.017 billion.

The consistent adjustments to net earnings and stockholders’ equity suggest a significant and ongoing impact from deferred tax accounting. The increasing difference between reported and adjusted asset values indicates a growing deferred tax position, which could be influenced by factors such as tax loss carryforwards or temporary differences between book and tax accounting methods. The relatively small adjustments to liabilities suggest that deferred tax liabilities are less prominent than deferred tax assets.

The financial performance, as indicated by a set of key ratios, exhibits notable shifts when deferred tax impacts are removed from the calculations. Generally, the adjusted ratios demonstrate a more pronounced financial leverage and return profile compared to their reported counterparts. Several trends emerge when examining the period between 2021 and 2025.

Profitability

Reported net profit margin decreased from 9.42% in 2021 to 6.69% in 2025, with a dip to 7.51% in 2024. The adjusted net profit margin follows a similar pattern, declining from 9.15% to 7.18% over the same period, though the magnitude of the decrease appears slightly less pronounced. This suggests that deferred taxes have a moderating effect on reported profitability fluctuations.

Asset Utilization

Reported total asset turnover remained relatively stable, fluctuating between 1.25 and 1.32. The adjusted total asset turnover also shows stability, ranging from 1.32 to 1.38. The adjusted ratio consistently exceeds the reported ratio, indicating that removing deferred tax assets and liabilities results in a slightly higher efficiency in utilizing assets to generate revenue.

Financial Leverage

Reported financial leverage increased substantially from 4.64 in 2021 to 8.90 in 2025. However, the adjusted financial leverage demonstrates a more dramatic increase, moving from 5.60 in 2021 to 15.11 in 2025, peaking at 18.59 in 2024. This indicates that deferred taxes significantly reduce the apparent level of financial leverage reported. The increasing gap between reported and adjusted leverage suggests a growing reliance on debt financing when deferred tax effects are excluded.

Return on Equity (ROE)

Reported ROE experienced considerable volatility, rising from 57.62% in 2021 to 101.24% in 2023 before declining to 74.65% in 2025. The adjusted ROE exhibits a similar trend but at significantly higher levels, increasing from 70.67% to 165.01% in 2023 and then decreasing to 143.17% in 2025. The substantial difference between reported and adjusted ROE highlights the considerable impact of deferred taxes on equity calculations.

Return on Assets (ROA)

Reported ROA decreased from 12.41% in 2021 to 8.38% in 2025, with a low of 9.59% in 2024. The adjusted ROA mirrors this downward trend, declining from 12.62% to 9.48% over the same period. The difference between reported and adjusted ROA is relatively small and consistent, suggesting a limited impact of deferred taxes on asset-based returns.

In summary, the removal of deferred tax effects consistently results in higher financial leverage and returns on equity. While asset turnover and return on assets are modestly affected, the impact on profitability metrics and, particularly, leverage is substantial. The increasing divergence between reported and adjusted ratios over time suggests a growing influence of deferred taxes on the overall financial picture.

The period under review demonstrates fluctuations in both reported and adjusted net earnings, consequently impacting associated profit margins. A comparison of these metrics reveals the effect of adjustments made to reported earnings. Overall, the adjusted net profit margin exhibits a similar pattern to the reported net profit margin, though with differing magnitudes of change.

Reported Net Profit Margin

The reported net profit margin decreased from 9.42% in 2021 to 8.69% in 2022, representing a decline of 0.73 percentage points. A subsequent increase to 10.24% was observed in 2023, before falling to 7.51% in 2024. The most recent year, 2025, shows a slight recovery to 6.69%. This indicates considerable volatility in reported profitability over the five-year period.

Adjusted Net Profit Margin

The adjusted net profit margin followed a similar trajectory, beginning at 9.15% in 2021 and decreasing to 7.54% in 2022, a decrease of 1.61 percentage points. It rose to 9.50% in 2023, then declined to 6.68% in 2024. The adjusted net profit margin concluded the period at 7.18% in 2025. The adjustments to net earnings appear to moderate the magnitude of the fluctuations observed in the reported net profit margin, though the overall trend remains comparable.

Relationship Between Reported and Adjusted Margins

The difference between the reported and adjusted net profit margins remained relatively consistent throughout the period, generally ranging between 0.2% and 0.8%. This suggests that the adjustments made to net earnings have a predictable, though not insignificant, impact on the overall profitability picture. The largest difference occurred in 2022, where the adjusted margin was 1.15 percentage points lower than the reported margin.

The observed declines in both reported and adjusted net profit margins in 2022 and 2024 warrant further investigation to determine the underlying causes. The recovery in 2023 suggests a potential rebound in operational performance, but the subsequent decline in 2024 indicates that these improvements may not be sustainable without continued attention.

The analysis reveals trends in both reported and adjusted total assets, alongside their corresponding turnover ratios, over a five-year period. Reported total assets generally increased from 2021 to 2025, with a slight decrease observed between 2022 and 2023 before resuming an upward trajectory. Adjusted total assets exhibited a similar pattern, consistently increasing throughout the period, though at a slightly lower magnitude than reported total assets.

Reported Total Asset Turnover

Reported total asset turnover remained relatively stable between 2021 and 2025, fluctuating between 1.25 and 1.32. A slight decrease was noted from 2021 to 2022, followed by a modest recovery in 2023. The ratio remained near 1.28-1.29 in 2023 and 2024 before decreasing slightly to 1.25 in 2025. This suggests a consistent, but not significantly changing, efficiency in generating sales from reported assets.

Adjusted Total Asset Turnover

Adjusted total asset turnover demonstrated a more consistent upward trend from 2021 to 2024, increasing from 1.38 to 1.36. The ratio peaked in 2024 before experiencing a slight decline to 1.32 in 2025. The adjusted turnover ratio consistently exceeded the reported turnover ratio throughout the period, indicating that the exclusion of certain asset components resulted in a higher efficiency measure. The difference between the two ratios remained relatively consistent across the years.

Relationship between Asset Measures

The difference between reported and adjusted total assets widened over the period, suggesting an increasing divergence in the components included in each measure. The adjusted total asset turnover consistently being higher than the reported total asset turnover suggests that the assets excluded in the adjusted calculation are less productive in generating revenue. The slight decrease in both ratios in 2025 warrants further investigation to determine if this represents a temporary fluctuation or the beginning of a more substantial trend.

Overall, the company demonstrates a stable ability to generate sales relative to its assets. The use of adjusted total assets provides a potentially more accurate view of operational efficiency, consistently showing a higher turnover ratio. Continued monitoring of these trends, particularly the slight declines observed in 2025, is recommended.

An examination of the financial information reveals a notable trend in adjusted financial leverage over the five-year period. Reported total assets generally increased, though with a slight decrease between 2022 and 2023, before resuming growth. Reported stockholders’ equity, conversely, experienced a consistent decline from 2021 to 2024, with a modest increase in 2025. This pattern significantly impacts the calculated financial leverage ratios.

Adjusted Financial Leverage Trend

Adjusted financial leverage demonstrates a consistent and substantial increase from 5.60 in 2021 to 18.59 in 2024. This indicates a growing reliance on debt or other forms of non-equity financing relative to adjusted total assets. While the ratio decreased to 15.11 in 2025, it remains significantly higher than the level observed in 2021.

Relationship Between Adjusted and Reported Leverage

Reported financial leverage also increased over the period, but at a slower pace than adjusted financial leverage. The divergence between the reported and adjusted ratios suggests that adjustments to total assets and stockholders’ equity have a considerable impact on the perceived level of financial risk. The magnitude of the difference between the two leverage ratios widens over time, highlighting the importance of considering these adjustments when assessing the company’s financial structure.

Asset and Equity Adjustments

The difference between reported and adjusted total assets remained relatively stable in the earlier years, but increased in later years. This suggests a growing amount of assets are being adjusted. Similarly, the adjustments to stockholders’ equity are substantial, with adjusted equity consistently lower than reported equity. The decreasing trend in adjusted stockholders’ equity contributes significantly to the increasing adjusted financial leverage.

The increasing adjusted financial leverage warrants further investigation to understand the nature of the adjustments made to total assets and stockholders’ equity. The trend suggests a potential increase in financial risk, despite the overall growth in reported total assets. The slight decrease in adjusted financial leverage in 2025 may indicate a stabilization, but continued monitoring is recommended.

Analysis of the presented financial information reveals significant fluctuations in reported and adjusted return on equity (ROE) over the five-year period. These variations are closely tied to changes in both net earnings and stockholders’ equity, with the adjusted figures exhibiting more pronounced volatility.

Reported ROE

Reported ROE demonstrates a generally decreasing trend from 2021 to 2025. It begins at 57.62% in 2021, peaks at 101.24% in 2023, then declines to 74.65% in 2025. This pattern suggests a strong correlation with reported net earnings, which also peaked in 2023 before decreasing in subsequent years. The substantial increase in 2023, followed by a decline, warrants further investigation into the underlying drivers of net earnings during that period.

Adjusted ROE

Adjusted ROE exhibits considerably greater volatility than its reported counterpart. Starting at 70.67% in 2021, it rises sharply to 90.01% in 2022, then experiences a dramatic increase to 165.01% in 2023. This is followed by another peak at 169.57% in 2024 before decreasing to 143.17% in 2025. The magnitude of these fluctuations indicates a significant impact from adjustments made to net earnings and stockholders’ equity. The consistent values above 140% suggest a strong underlying profitability when considering these adjustments.

Net Earnings Trends

Reported net earnings decreased from US$6,315 million in 2021 to US$5,732 million in 2022, increased substantially to US$6,920 million in 2023, and then decreased again to US$5,336 million in 2024 and US$5,017 million in 2025. Adjusted net earnings follow a similar pattern, though the magnitudes of the changes differ. The divergence between reported and adjusted net earnings suggests the presence of items impacting reported results that are excluded in the adjusted calculation.

Stockholders’ Equity Trends

Both reported and adjusted stockholders’ equity demonstrate a consistent downward trend from 2021 through 2024. Reported equity decreased from US$10,959 million to US$6,333 million, while adjusted equity fell from US$8,677 million to US$2,800 million over the same period. A slight increase in both reported and adjusted equity is observed in 2025, but levels remain significantly lower than in 2021. The substantial decline in adjusted equity is particularly noteworthy, as it contributes significantly to the higher volatility observed in adjusted ROE. The reasons for this decline should be investigated.

In summary, the analysis indicates a complex relationship between net earnings, stockholders’ equity, and ROE. While reported ROE shows a moderate decline after a peak in 2023, adjusted ROE exhibits substantial fluctuations, driven by significant changes in both adjusted net earnings and adjusted stockholders’ equity. The consistent decline in stockholders’ equity, particularly the adjusted figure, is a key observation requiring further scrutiny.

The period between 2021 and 2025 demonstrates fluctuating performance in both reported and adjusted net earnings, alongside a consistent increase in reported total assets. These movements influence both reported and adjusted return on assets (ROA), exhibiting a general decline over the five-year period, though with some variation.

Reported Net Earnings & ROA

Reported net earnings decreased from US$6,315 million in 2021 to US$5,732 million in 2022, before increasing to US$6,920 million in 2023. A subsequent decline is observed in 2024, falling to US$5,336 million, and continuing to US$5,017 million in 2025. Correspondingly, reported ROA decreased from 12.41% in 2021 to 10.84% in 2022, peaked at 13.19% in 2023, and then decreased to 9.59% in 2024 and 8.38% in 2025. The decrease in reported ROA from 2021 to 2025 suggests a diminishing efficiency in generating earnings from reported assets.

Adjusted Net Earnings & ROA

Adjusted net earnings followed a similar pattern, decreasing from US$6,132 million in 2021 to US$4,975 million in 2022, increasing to US$6,422 million in 2023, then decreasing to US$4,748 million in 2024, and finally increasing to US$5,389 million in 2025. Adjusted ROA mirrored this trend, moving from 12.62% in 2021 to 10.12% in 2022, peaking at 12.97% in 2023, and then declining to 9.12% in 2024 before a slight recovery to 9.48% in 2025. The adjusted ROA trend, while fluctuating, also indicates a general decline in profitability relative to adjusted assets over the period.

Asset Trends

Reported total assets increased steadily throughout the period, from US$50,873 million in 2021 to US$59,840 million in 2025. Adjusted total assets also increased, though at a slightly slower pace, moving from US$48,583 million in 2021 to US$56,865 million in 2025. The consistent growth in assets, coupled with the fluctuating net earnings, contributes to the observed ROA trends.

ROA Comparison

Reported ROA and adjusted ROA values are relatively close throughout the period, with adjusted ROA consistently slightly higher than reported ROA. The difference between the two ROA metrics suggests that adjustments to net earnings and total assets have a modest impact on the overall profitability assessment.

In summary, while the company experienced asset growth, the observed declines in both reported and adjusted ROA from 2021 to 2025 suggest a decreasing ability to generate profits from its asset base. The fluctuations in net earnings contribute to the volatility in ROA, and further investigation into the drivers of these earnings changes may be warranted.