Lockheed Martin Corp. (NYSE:LMT)

The company demonstrates generally positive operating cash flow throughout the observed period, though with some fluctuation. Net earnings exhibit volatility, decreasing from 2021 to 2022, increasing in 2023, and then declining again in 2024 and 2025. Several non-cash adjustments significantly impact the conversion of net earnings to operating cash flow, with depreciation and amortization consistently contributing positively. Stock-based compensation also provides a consistent, though smaller, positive adjustment. Deferred income taxes and pension settlement charges introduce considerable variability, swinging between positive and negative impacts on cash flow.

Investing activities consistently represent a cash outflow, primarily driven by capital expenditures which remain relatively stable around the $1.6-1.7 billion range annually. Other investing activities contribute to the outflow, though with varying degrees of impact year to year.

Financing activities are characterized by substantial cash outflows, largely due to share repurchases and dividend payments. While the company occasionally issues long-term debt, this is often offset by repayments. The magnitude of share repurchases decreases over the period, while dividend payments remain relatively consistent. Overall, financing activities consistently consume cash.

Operating Cash Flow Trends

Net cash provided by operating activities begins at $9.221 billion in 2021, dips to $7.802 billion in 2022, recovers to $7.920 billion in 2023, declines to $6.972 billion in 2024, and then increases to $8.557 billion in 2025. This suggests a degree of sensitivity to underlying earnings and working capital fluctuations. The adjustments to reconcile net earnings to operating cash flow show a significant increase in 2024 and 2025, indicating a larger impact from non-cash items during those years.

Working Capital Dynamics

Significant fluctuations are observed in several working capital accounts. Receivables, net, show a large negative impact in 2022 and a substantial negative change in 2025. Contract assets and inventories also exhibit consistent negative changes, suggesting potential challenges in managing these assets. Accounts payable and contract liabilities demonstrate positive changes in certain years, partially offsetting the negative impacts from receivables, contract assets, and inventories. These working capital movements contribute to the variability in operating cash flow.

Non-Recurring Items

Pension settlement charges are prominent in 2021 and 2022, providing a substantial positive impact on cash flow during those years. Reach-forward losses on select programs become a significant outflow in 2024 and 2025. These items highlight the influence of specific events on the company’s cash flow profile.

Cash Position

Despite the financing outflows, the company maintains a generally increasing cash and cash equivalents balance, rising from $3.160 billion in 2021 to $4.121 billion in 2025. The net change in cash and cash equivalents is negative in 2022 and 2023, but positive in 2024 and 2025, reflecting the interplay between operating, investing, and financing activities.